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- [00:00]
A
Diying your financial strategy can actually become a liability. I recently sat down with David Jackson at Domain Money to pressure test my own plan. What I loved was the objectivity and how comprehensive it was. Domain is strictly flat fee. They don't sell products, so the advice is unbiased and personalized to your situation. They integrated everything from my cash flow to my real estate strategy into one clear, actionable roadmap. If you're ready to graduate from guessing to knowing, go to biggerpocketsmoney.com CFP book a free strategy session and see what a a real pro like David can do for you. This is a promotion for Domain Money, a registered investment advisor with the sec. Bigger Pocket's Money may receive compensation if you choose to work with Domain Money as a client. I, Scott Trench, am a current client of Domain Money and receive non cash compensation related to this promotional activity. This is not personalized investment advice. For the full disclosures, visit biggerpocketsmoney.com CFP study and play come together on a Windows 11 PC and for a limited time, college students get the best of both worlds. Get the unreal college deal everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 Premium and a year of Xbox Game Pass ultimate with a custom color Xbox wireless controller. Learn more@windows.com studentoffer while supplies last ends June 30th terms at aka mscollegepc. Right now get up to 15% off select storage solutions put heavy duty HDX totes to good use, protecting what's important to you. The solid impact resistant design prevents cracking and the clear base and sides make items easy to find even when the totes are stacked. Find select shelving and tote storage up to 15% off at the Home Depot. To organize every room in your home from your garage to your attic, visit homedepot.com how doers get more done Ten
- [01:51]
B
years ago, $1 million was kind of the benchmark for the FI community. Then it became 2 million. Today I'm hearing 2.53 even $5 million. So what happened? Are these infl fine numbers actually necessary or are people being too conservative? Hello, hello, hello and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me as always, is my million dollar co host Scott Trench.
- [02:20]
A
Thanks Mindy. Great to be here. That was a grand. A 40 grand intro right there. So today we're going to be talking about whether phi numbers are in fact creeping higher than they need to be and how to avoid becoming so conservative that you delay the optionality we're all pursuing. You set out upon the journey to financial independence.
- [02:38]
B
Scott, that was a really great joke that you made. I called you my million dollar co host and you said that was a 40 grand introduction. $40,000 is the amount of money that you can spend with a $1 million portfolio according to the 4% rule. So thank you so much for that little nerd joke. At 2.5 million, you're now able to spend $100,000 a year. Do you think this is enough for most people? Do you think people are inflating their fine numbers because they're being conservative?
- [03:11]
A
Yes, I think that $2.5 million is enough for most people to enjoy true and lasting financial independence, even with a family in this country, in most places, not all places at the median, but in most places. So I think that that's my short answer to that, but there's a lot of nuance behind it and I've actually gone into great lengths in to kind of test that assertion. But I think, I think, yes, that is the answer. And I also think that the fire community is a large and growing population. The BiggerPockets money community is fire or more fi than fiery because they, you know, I think a lot of two thirds of BiggerPockets Money listeners, for example, say that they are open to or definitely intend to have some kind of ongoing business or active income that they earn after reaching financial independence, which may be at odds with some other members of the fire community who really want to just be totally passive after that. There's still a third of BiggerPockets Money listeners who want to be truly financially independent with no active income whatsoever. But that's not the norm in this part of the community. And I think that that is why our listeners here at BiggerPockets money tend to cluster around this $2.5 million number or even higher in terms of their target fire number than maybe some of our friends over at choose a fi or on the leanfire Reddit, for example.
- [04:32]
B
Scott, do you think that 2.5 million is enough for that one third of our audience who isn't planning on generating income after they retire? Or do you think the 2.5 is enough for people who are also going to be generating income?
- [04:45]
A
It implies $100,000 a year in inflation adjusted spending. Right. And so that's the, that's the question. Is that enough for you? The spending forecast is much different there. I think I'm gonna have to reframe your question, because I think that the. Is $2.5 million enough question is about goal posts moving, Right? The number used to be a million bucks, and now it's 2.5 million in this community. Mindy, you're pretty frugal. I don't think you would enjoy living on 40 grand a year anymore.
- [05:16]
B
Not that I've now had a taste of the hundred grand a year lifestyle. No.
- [05:22]
A
Yeah. And so I think the short answer is yes, the goal posts have moved. And I think that there's a portion of the community that digs their heels in and says, no, they shouldn't have moved. That's a you problem, Mindy, or me, Scott? You know, my goalposts have certainly moved, so that changes the game. Okay, fine. If you want to spend the same amount for the entirety of your life, that's great. Maybe a million bucks is enough for your version of financial independence, but it's not enough, I think, for a lot of people. As this generation approaching fire has, I think, grown up, gotten married, had kids, and life has evolved and they've gotten wealthy, and their portfolios allow more spending, and the combination of accumulating wealth and increasing incomes allows that to happen very naturally and very responsibly. And I think that's. That's the challenge that people are grappling with in the community is these numbers seem larger and larger. And they are. And there's a reason for that, right? That it's the compounding effect of wealth growth, maybe. Mindy, can we go through your story here or hear about your journey? Like how what was your spending like 10 years ago and what is it like today?
- [06:25]
B
Well, today shouldn't really count because I'm building a house. But 10 years ago, it really was in the 36 to 40 thousand dollars a year range. And my husband was working and I had. Oh, I guess I was working. I was Bigger Pockets because, like, I was still a stay at home mom. I had just started at Bigger Pockets. We were making enough money to cover all of our expenses and invest, max out both 401ks, Roth IRAs, et cetera, continue to put money in after tax investments as and because we were. We were spending so little. That is how we were able to get to financial independence in the first place. I don't wanna say it was a tight life, but it wasn't a really lavish and extravagant life. It's funny that we're recording this today. Uh, Carl and I went out to dinner last night at a very, very nice restaurant. I even said to him. I feel kind of like an imposter here because I feel so, like, pretentious. This is such a nice restaurant and this isn't me. But the flavors were amazing. It was a really great restaurant. The only reason we went was because it was a credit rewards thing. You get like 50% off your meal or something. It was very delicious. I enjoyed my meal, but I still felt a little bit weird. So as my net worth has grown, my mental acceptance of my net worth has not grown. I still don't really identify with how much money we have. I still go back to, you know, when I was a kid shopping at garage sales. Everything was coupons and sales, and I just went to garage sales last weekend. I think they're fun, but I think that a lot of people are starting to recognize that $40,000 is a great base, but it doesn't allow for a lot of the extras. And if your net worth has grown to the point that you can have a lot of extras, my friend Chris said, I'm not going to fly coach so that my kids can fly first class when I'm gone. And I'm starting to have more of a shift to that as well. But it's hard for someone who has been frugal. It's hard to break out of that now. How is my spending now? I spent $200,000 last month because I'm building a house and a lot of bills came due all at once. So my spending has gotten way freer.
- [08:35]
A
But even without the house spending, you're not spending 40 grand a year.
- [08:39]
B
No.
- [08:39]
A
Here in 2026, once we exclude the one timers. Right.
- [08:43]
B
If I exclude those crazy house bills, I'm probably spending 75 to $100,000 a year. And when I say probably, it's because I'm not really tracking it. I mean, I have Monarch as spending tracker and my net worth tracker, for lack of a better word. And everything comes in and out of the same bank account. So it's way skewed right now. But before we were starting to build the house, it was probably between 75 and 100,000, you know, depending on the month and what vacations we're taking. That's something that we're doing a lot more of, is taking vacations with the girls. We're going on a five friends travel trip next year to Japan with the girls. And that was not cheap at all.
- [09:24]
A
Yeah, my spending is averaging north of $12,000 a month. Right. That's a lot more than I was spending when I was, you know, 20, 23 now we have kids in childcare, but that's a big jump for us. And sometimes it comes in even more than that, depending on if we eat out or have a vacation or something like that. That's a big jump for us. Now those numbers will go down meaningfully when the kids go to school, going to public school. But that's a, that's a big challenge for us. And our version of financial independence is not stay at home with the two kids. We like, we like to do this. We like to have professional pursuits and other interests with our days, Virginia and I. And so that's our number. That's not too far off the median household spending in the local area that we've chosen to live in. And I think that's the real framing of this is I think a lot of fire numbers are predicated on these very aspirational, highly frugal targets. And I think that there's a sect of the fire community that is very pure or very purist in their adherence to a frugality ethos. Right. I'm going to be frugal for life. That's the commitment we're making for fire. And I think a lot of people in the movement, as they've grown up and gotten wealthy and gotten married and have kids, are realizing maybe, maybe they're in the same boat as me. You know, I can afford it. My portfolio is doing great. I'm going to go ahead and spend more and bump that spending up and enjoy more comforts, more luxuries, and more travel. And I think that's what you're going through a version of that. Is that a common thread in the circles that you hang out with, with other people who are financially independent, that
- [10:45]
B
we're spending more as we get older and as our net worth continues to grow? Yes, yes, Mr. Money Mustache still gets by on $24,000 a year or $30,000 or that actually is how much he spends. He just doesn't spend a lot of money. He's not a clothes horse, so he's not going out and buying brand new clothes. When he does buy clothes, he goes to the thrift store. He thinks it's fun. He does a lot of bicycling. He did buy a new car a few years ago when his car died. But otherwise, like, he doesn't have these giant expenditures. He eats low cost, healthy foods at home. He doesn't really go out to dinner very much. And that's the life that he wants to live. He doesn't have to Live that life. He could spend more. He doesn't need to. He doesn't feel like he wants to. I am now trying to embrace the spending muscle, trying to flex that spending muscle a little bit more so that I can do more fun things with my kids. When my kids were younger, vacations really weren't a thing. They still need naps. They still. Have you ever taken a vacation with your kids, Scott? Isn't it super awesome fun?
- [11:51]
A
Yes, it is super. You get, you get a great moment of the three day trip. It's, it's really wonderful.
- [11:58]
B
If you're lucky, you get one great moment. So I, I saw somebody say this the somewhere and it was perfect. They said vacations, when you have young kids, they're not vacations, they're just parenting in an unfamiliar environment. We didn't take a ton of vacations. We did, you know, family trips. We'd go up to Estes park for the day and then the kids would fall asleep on the way home. We didn't spend a lot of money because we were at home a lot of the time. But now that they're older and like, they're fun to go on trips with. A one year old is cranky is not any fun to go on a trip with. Yeah, I, you asked me 20 minutes ago, are people in my community starting to spend more? Yeah, I think there's a lot of people embracing this spending muscle. After being so frugal for so long. They're like, oh, look at what my money can do for my life. It isn't just let me buy brand new cars and toys and things because I want to spend money. It's let me use my money to enhance my life. And that is what Carl and I are doing as well, is just how can our money enhance our life? Oh, you know what? We live in a house with stairs everywhere. We're building a ranch house so that we can age in place.
- [13:06]
A
Of course, I nerded out about this to an extreme degree. And the way I would phrase this, this challenge is the spending reverts to the mean. People tend to, over time become like the average of the people in the areas that they live in. Now, Mr. Money Mustache is an exception. And you can certainly live a frugal lifestyle. Fore. But many people don't want that and don't need to do that once they've gotten to or well past the baseline level of financial independence. So I've tried to articulate this with a series of data sets around what is average spending for households like mine? In my area, right. So I live in Denver. I have a household with four people who are age 35 and spending for the middle 20% of a household like this looks like around $9,000 per month in our area. That's between housing, utilities, transportation. That's different from, you know, another area like Los Angeles, right, Where they're going to spend more, at least a thousand dollars more a month, most of that going to incremental housing costs, but also hitting other categories. And so for the Denver area, you know, that's what median income looks like. And now if my fire plan says I'm going to spend half of that forever, that's doable. Like that's not an unrealistic that like the bottom 20% income quintile in Denver does live on less than $5,000 per month for a household of four. Like that's just a fact. They make less than that, they spend less than that. So it is possible. But you may find over time that you're going to want to revert to the mean. You're not going to want to spend $740 on food for life if you don't have to for your family of four in the Denver area. So I think that's where the middle percentile comes up. And I think higher earners should also be very careful here because you may find that if you're a high income earner and you're able to spend at a certain level on the journey to fire, and all your peers are doing that and all your social circle is doing that, you may not want to live like the middle or the second or the bottom quintile households in your area. Do you may want to live like that for a period of time to get to financial independence, because financial independence is more important than luxury spending. But once you get there, if the option exists, you may find that your long term numbers tend to regress towards the mean. And that's okay. That's, that's the whole point of financial independence. I think that's why the goalposts are moving. That's, that's the data reason. What do you think, Mindy? Do you, do you think that I'm onto something here?
- [15:27]
B
When you say regress to the mean, do you mean you're spending more than normal and, and you'll go backwards or you're spending less than normal and you'll move up?
- [15:35]
A
I'm saying that when people pursue financial independence, they are super cheap, frugal, wonderful people and they go after that, that very intensely. And then when they reach fire, they become wealthy. And the big things beginning to begin to compound. And they're like, I don't need to be frugal anymore. I'm not going to live like I'm one of the bottom 20% earners in my area. That's possible. That's what I've done. But now that I can, I'm going to actually begin to live more like the average person in my area, and I'm going to increase my spending. I want to go out to the fancy restaurant a few times a month or, you know, a few times a year, you know, whatever it is. So the reversion to the mean means I'm going to start very cheap and I'm going to move towards the average after I have the clear ability to do so.
- [16:16]
B
Okay. I was going to say after you have the clear ability to do so. If you are running your phi numbers based on your current low spending, and that's your phi number is 25 times your low spending, you don't have the means to then bump up to the median.
- [16:33]
A
That's right. I think that's exactly what I'm trying to articulate here. During the journey to financial independence and in the early days of financial independence, as we're on the cusp of financial independence, I think a lot of people are very, very frugal in this community. But once they shoot past that and compounding begins to take effect or they find, hey, I'm actually fine with this extra work. You know, the two thirds of the biggerpockets money community who's fine with extra work after fi. Why would you continue to spend like you're in the bottom quintile if you don't need to, if that's not something you want, if there's not an ideology behind that, if you're fine doing more, you will, of course regress to the mean. You'll be more like the people in your local area. That's what's tending to happen. I believe in the financial independence community to a large degree. Certainly in your case, certainly in mine, maybe others as well.
- [17:17]
B
Yeah. But I had to force myself.
- [17:18]
A
I think that that's healthy, though. I think that's. That's going through a lot of people. I think some, a good person in the community do have that problem because they're, they're hoarders to a certain extent. Right. As the term Frank uses, Frank Vasquez. And I think that's accurate. And then there's an unlearning of that. And then I think Other people don't have any problem with it. It's just part of the journey. Yes, of course I'm going to get to financial independence and then as my financial independence number supports higher spending, I'm going to let my spending naturally increase responsibly in line with that. That's the way I've thought about it from my perspective.
- [17:45]
B
Well, do you think people are inflating their numbers along the journey or do you think people, 10 years ago we started off, oh, $1 million. Everybody talked about a million dollars. Nobod, 2.5 million. It was a million. And now I'm hearing a lot more people talk about 2.5 million. So are people inflating their numbers because they realize that the 40,000 isn't enough, or are people inflating their numbers because they're recognizing that we are in an inflationary time period? There's stuff that's just is more expensive, how everything has gone up, the cost of everything, groceries and health care and I think healthcare had like a 26% increase in premiums last year. Everything's more expensive. Are people adjusting their fine number because they're recognizing everything's more expensive, or are they adjusting their fine number because they want to spend more?
- [18:37]
A
Mindy, your question is how much of this is inflation and how much of this is lifestyle creep? Right. Trying to separate out the two. And it's part both, I think, for the financial independence community. Right. So on the one hand, you have inflation. $40,000 of spending in 2015 is equivalent to $57,000 of spending here in 2026.
- [18:58]
B
I mean, that's still a lot.
- [18:59]
A
Yes. You basically go from 1 million to 1.5 million. Right. I think that's more in the ballpark of where a lot of very traditional Polks who are beginning the journey to financial independence will find is a good cuspify number. Right. There's a true independence, I think, that many in America can feel at that level where they've got a pretty good insulation from work if they keep their spending reasonable. And I think you can live on that in many places in this country. I think that the good life or more spending, more optionality, more freedom begins to hit harder at that $100,000 mark. And we have another three to four grand in discretionary expenses every month. And that is something that I think many people are open to being somewhat entrepreneurial or working a little longer or harder if things are good, continuing in their status quo to achieve. And I think other people are very discontent at work and can't imagine working for that extra million or that extra $40,000 in spending right now and can't fathom that. And that's why there's this, this bifurcation or why people get so emotional about the moving goalposts in the financial independence community.
- [20:02]
B
I think you hits on something right there. I can't imagine staying in this job just so I can save more money. I would encourage people who have reached a very nominal amount of financial independence. Like what is your Lean Phi number? What is the bare bones that you can retire on and have like a decent but very bare bones life? And then if you're in that position, I think a lot of people come to the FI community from that position. Oh, I hate my job. I can't wait to leave. Once you have a good safety net, then start looking for a new position so that you can continue to grow to a comfortable retirement level and then retire.
- [20:42]
A
Maybe you can relate to this. Maybe, maybe you and Carl. I don't know. When I started the journey to financial independence, I was working at Dish Network, which was, you know, very classic organizational structure. I had a cubicle and I had to show up every day making 48 grand a year. So from that lens, spending $40,000 a year or less and not going into the office was extremely appealing. That was a life changing, you know, epiphany. When I read Mr. Money Mustache, I wanted to go after that right, right now at age 35, 12 years, I guess from that, from that moment with a different life, family and circumstances here. I realize like if I had that progression, there's many alternate or counterfactual paths where I could be making between 100 and $200,000 a year in income and I would not be fine living on $40,000 a year with my family of four in 2026. Right. And so that's, I think, something that the community or that maybe other folks who have, have had some kind of similar experience need to grapple with here. Like that was true of 23 year old Scott Trench. That was a real fire number, a goal that could have been achieved. It's not true of 35 year old Scott Trench and the life I lead now. I would rather work or do something than live off of $40,000 a year or even $57,000 a year in inflation adjusted spending. I wouldn't rather have a boss that had control over me or no options. So I might keep my expenses much lower if I was not financially independent right now. In that counterfactual example, I might still house hack, for example, or do something like that. But I would not be spending that equivalent for a household of four. I think that's the challenge. I think that's, that's where, that's where the goalposts move. People grow up. They have different goals. They change, they evolve.
- [22:25]
B
The fi community has long preached against moving your goalposts and keeping up with the Joneses and lifestyle creep and all of this. How does what we're discussing today differ from that? Because I think it does differ from that a little bit.
- [22:42]
A
I think we have to separate it out into three buckets. There's the inflation. There's the desired lifestyle moving as a fundamental reality. Like, there's just a difference in single Scott Trench spending versus married with kids Scott Trench family spending last. There's the empowerment of the portfolio. Expanding that, hey, do you just let it continue to grow forever and keep your spending flat? You can. Or you can let your spending flex up as your, as your portfolio grows. Right. If your portfolio continues to compound at 10% a year, you can theoretically increase your spending by 10% a year forever, or whatever percentages of the additional income. Right. And so that's something that the community has to grapple with. Like, is there a values breakup when that happens? For some people, the answer is yes. I value being frugal. That's my identity item. But other people, no. Like, why wouldn't I enjoy this wealth that's beginning to compound? It's a great problem, but I think it's separating those three. How would you, how would you frame it?
- [23:39]
B
Mindy, this is actually a question that I've struggled to answer. What is the difference between letting your spending grow as your net worth grows versus lifestyle creep? And what I've come to is lifestyle creep is like getting a raise. Okay, Now I'm making $5,000 more a year, therefore I'm going to spend $5,000 more a year. Even though you're not financially independent yet, and letting your spending grow as your net worth grows is after you've reached financial independence. Does that make sense?
- [24:12]
A
Yeah. I also think there's a, there's an irony here where, where I wanted to pursue financial independence because I didn't want someone to have control over my life like a boss to have control over my life when I, when I wake up, where I, where I shop, you know, all that kind of stuff. I think that ironically, in the pursuit of doing that for a time, I valued frugality as a virt and taken too far, that is allowing this purity of Low spending to actually have control over my lifestyle decisions. You know, how do people do, you know, that have some version of, I don't spend a lot because it's my identity and it's, it's something I value and I don't relate to those people who spend more, you know, or whatever. And then that in itself is a trap. They literally are controlled by this instinct not to spend. Or maybe people, other people's judgment in the community about their spending. I think that's like, no, I'm not going to be controlled by a boss, and I'm also not going to be controlled by random people on the Internet who think that I should spend this amount or that amount. Like, that's crazy. That's the whole point of financial independence is to be financially independent, to do exactly what you want, when you want, with who you want, how you want.
- [25:23]
B
You asked me, how many people do I know? Do you mean besides me?
- [25:28]
A
We meet a lot of those types in the financial independence community. And that's great. Like, that's wonderful. That's. I'm not judging their worldview. I'm just saying they have no power to impose that on my life or anybody else's. Like, it's literally laughable that they would judge somebody else in the community for having a higher spending target than them.
- [25:45]
B
Who was it? Posted on Facebook a while ago. They're like, have you noticed that there are some expenses in the FI community that are approved, like a craft beer, but other expenses, like a CFP or, you know, better travel seats are not approved? And that was a real turning point. This is a few years ago they posted this, and that was a real turning point in my thinking about money. Like, why can't I spend money on something that I like? As long as I like it and I can afford it, why do I worry about what some other person in the financial independence community, the Internet retirement police, want to come and police us? Go right ahead. Said email, tell somebody else that I don't care. Dot com.
- [26:27]
A
Yeah, I, I think it starts out as chasing freedom. You go after it and it's like, why is everybody else not doing this? And I kind of agree. I empathize with that. Right? Like, why is not. Why isn't everybody starting very frugally and accumulating a ton of wealth so that they can have control over their, their days to a greater degree? Then I think it becomes unhealthily attached as an identity, and then long after it's still required, we can. There's a continuation of this As a virtue, like a virtue signaling almost for low spending. And it should detach at some point healthfully, I think, and I think that good planning to bring this down to practical sense here is I think that if your fire number requires you to spend much, much less than the median household of your type in your area permanently, that you should take some pause there, you know, and you don't have to work longer or whatever. But I think you should be open to flexibility and change and evolution. Say it may be that in five, 10 years I will want to regress to the mean. If I'm spending 500amonth on groceries right now, it may be that in the Denver area for a household of two, for example, I'm going to want to spend a thousand dollars a month on food over time. And I should be open to that possibility. I don't have to delay my fire number or my departure from work or the power, the resetting the power dynamic between my employer and me. But maybe I'll be open to other possibilities. Entrepreneurship, another job I like or whatever. And one day I may want to do that. And that's okay. It's not a, it's not a betrayal of the virtues of the fire community or whatever. That's a normal human pattern here.
- [27:58]
B
Yeah, I think that your financial journey is your financial journey and don't spend money you don't have. Don't spend more than you can afford to spend. But if you want your lifestyle to inflate and your net worth has inflated, there's nothing wrong with that.
- [28:12]
A
That last. I think we covered this in four hours, so I won't touch on it in too much detail. But I will also say your healthcare costs are going to go up, most likely across your early retirement journey, so you should plan on that as well. That's a different discussion point here. Some people literally have zero health care costs right now for various reasons. We touched on another episode and some people will have very, very high ones immediately and that will continue through an early retirement.
- [28:34]
B
Hey Scott, if I wanted to plan on my healthcare being my 64 year old healthcare spend, is there any sort of calculator could go to to run these numbers?
- [28:46]
A
Yeah, you can check out the BiggerPockets Money podcast episode that dropped on June 23, the ultimate guide to Healthcare Costs. Or you can go to biggerpocketsmoney.com healthcare costs and check out that calculator if you want to estimate those particular costs there with and without premium tax credits or subsidies.
- [29:02]
B
Thank you, Scott. Did you make that yourself?
- [29:06]
A
Yes, I did. I'm not shy about it either. So yes, I really enjoy building these apps. So please give me feedback. I was told by one guy that I got within $10 per month, month of in my estimate of his actual quote from the ACA marketplace. So I probably won't be that close in most marketplaces, but I would love feedback about where I'm off in any of those as I'll be constantly updating these tools as I try to maintain them and make them better over the years.
- [29:27]
B
Yeah. So Scott and I live in the same general area in Colorado and running the numbers on his age of 35 versus my age of 53 gave us very different numbers. He's got small kids, I've got older kids. But having these, these numbers in hand is really helpful to see. Yes, your health care costs are going to go up as you age in most states, not all states. Some states don't allow different charges for different ages. So then Everybody pays the 64 year old rate because at age 65 you go on Medicare. But don't plan your retirement numbers based on your 30 or 35 or even 40 year old self's health care costs because that's not going to stay the same.
- [30:09]
A
And a big part of that is child care. Right. So I know that a lot of people have child care, you know, childcare or not. You know, there's a lot of families that are listening to bigger pockets money for example. And so I went to some trouble to try to calculate what the averages are for childcare in various metros. And those can vary dramatically. Right. We talk to somebody in certain locations and they're like, what are you talking about? Childcare is nowhere near that expensive. And in other places people will find childcare to be exceptionally expensive. Literally, literally four or five hundred bucks a week per kid. So that's the, that's another challenge in here that that affects bigger pockets money listeners, if not the average in the population, because it's a point in time. It's only for those first few years of a child's life where that expense exists.
- [30:50]
B
That's a cost of having kids. If you are going to continue to work, if one of your is going to continue to work, then that's the cost of having kids.
- [30:58]
A
Absolutely. Do you think going back to the original question, that 2.5 million is enough in 2026?
- [31:04]
B
I think for most people, 2.5 million in investable net worth so that they could pull from it under the 4% rule at $100,000 a year, I Think that's enough for most people. But I also encourage everybody to look at their actual spending. If you're spending $180,000 a year right now, then 2.5 is not going to be enough to cover you. You're going to need closer to 4, 4 and a half million in investable net worth and that is your choice. You can continue to spend 180 and work longer and generate the money that you need need, or you can cut back on your expenses.
- [31:39]
A
That's right. And I would say yes, $2.5 million is enough for the vast majority of even 2 of 2 to 4 person households in the United States of America to live a very comfortable life or to reset that power dynamic between them and their employer, excluding certain specific geographies that again we target and discuss in the, in the tool I built there@biggerpocketsmoney.com budget. And I think that, that it's okay to spend that amount or more if you have the assets, your portfolio is growing or you choose to continue working or whatever it is that you want to do. It's your life. Fi, I think is about the power dynamic. To do what you want, when you want, with who you want, how you want, and retire early is a very loaded term. But two thirds of the bigger pockets, money listeners, once they reach fire, intend to or are open to continuing to work or earn some form of active income. So that's what retire early literally means. The people listening to this podcast, I think that's totally fine.
- [32:39]
B
Oh, Scott, do you hear that? That's somebody yelling at the radio. But what if the market gets really crazy? What about market volatility? Shouldn't I work just a little bit longer and save just a little bit more to make sure that if the market goes down, I'm still covered?
- [32:54]
A
Yes, I think, I think that that's a big part of why this number continues to move as well. If the circumstances are not bad at work or in life, then yes, there's real reasons to be skeptical of the 4% rule for a more than 30 year early retirement. The 4% rule already factors in inflation and withdrawal sequence and the high probability over a 30 year period. But I think people, if they're not unhappy if things are going well, are totally fine and justified to continue building a little bit larger of a portfolio to build up to that $2.5 million number that maybe is a buffer beyond their actual spending that gives them more flexibility, a bigger buffer and more options later in life. So again, I think that's These are all the reasons why the goalposts are moving for the community. And I think it's again, like, it's not that big of a deal. It's not like this is like some big problem in the space. People get to make these decisions. It's a privilege and it's a sign that it's working. Like millions of people have literally seen this journey actually pay off to some degree and are now deciding if they want more. That's a great outcome. That's not a problem.
- [33:58]
B
I thought you were going to say no. The 4% rule covers market volatility. It takes into account market volatility and inflation. And, and, and it does.
- [34:06]
A
It absolutely does account for all of those things. And there's two sides of this argument that are screaming at each other on the Internet. And they're both right and they're both wrong around, hey, you can. The withdrawal rate is actually higher. Stock market returns have been better than that for a very long period of time. Flexible spending, all these items here. And then there's the other side of it that says no. A fixed 4% rule fails unacceptably, often in longer than 30 year retirement withdrawal horizons. And we've had both of those parties on the podcast here. Karsten Jeske, for example, Big Earn talking about why the 4% rule is not enough for decades long early retirement. And we've had folks like Frank Vasquez who are talking about how, no, you can actually withdraw much more than that with certain, certain portfolio constructions. Both of them have great points. They're both very smart people. And I think that a lot of people are like, you know what, if I'm going to err towards something and my life is not uncomfortable right now, I'm happy with where I'm at. Why wouldn't I continue to pad that number and give and give more buffer to it? That's certainly what you've ended up doing, Mindy, in practice. And certainly what I've ended up doing in practice to a large degree, yes,
- [35:14]
B
that is exactly what I've done. But I'm not compelled to do it. I just happen to be generating income through my real estate agency and through this podcast. So I continue to invest. I mean, what else would I do? Spend it. Come on, Scott. We've established I am not that good at spending money.
- [35:34]
A
You know, you're proving my point, right? And, and this is like the whole fire community. There, there's a, there's a portion of them that will want to not do any active income and some, some Folks really treat that as like a pride thing. Like, no, I'm actually going to. To not earn any income and live off the portfolio. And that's great. That's a wonderful outcome. And some of them will do that aggressively with a higher withdrawal rate too, and not think it's regressive. That's fine. I would think it's a little bit aggressive to do that again. Two thirds of the people listening to this show want to start a business or have a side hustle or open to those possibilities after early retirement. And why not, right? You like talking about real estate. It makes a lot of extra money. It feels good to make that extra money. And you still get to do what you want most of the time, time with your day. That's great.
- [36:16]
B
Two thirds of bigger pockets money listeners, 100% of bigger pockets Money hosts still work.
- [36:22]
A
So, Mindy, I think that, yes, the goal posts have moved for at least a portion of the financial independence community. Certainly here in the Bigger pockets money community, where the midpoint is around two and a half million, meaning half the folks listening to the show want actually more than that for their financial independence number. I think that's, that's totally fine. That's not in conflict with the values of the financial independence. Retire early community. Early retirement is a loaded word that can mean anything to anyone. But ultimately, building wealth is about accumulating options. And how you choose to express those options is your business. And you are wonderful for whatever you choose, whether that is to live a very frugal life somewhere quiet and enjoy nature, or whether that's to amass to chubby or fat fire and enjoy the finer things. Like, that's all fine. That's the whole point of this. And regardless of how that what your goal is, we're going to try to help you here at BiggerPockets Money meet that goal.
- [37:17]
B
Yeah, I think the goal posts have moved for a variety of reasons. Like you said, Scott, the inflationary environment that we find ourselves in right now, along with people wanting to use their money to be more comfortable, the frugality message in the beginning of the FI community, you know, 10, 15 years ago, was be frugal at all costs. Costs and spending money was not cool. And now it's more like, well, you know what? I actually do want to be a
- [37:44]
A
little bit more comfortable.
- [37:45]
B
And like you said, I think that's perfectly fine so long as you can afford it. All right, Scott, should we get out of here?
- [37:50]
A
Let's do it.
- [37:51]
B
All right, that wraps up this episode of the Bigger Pockets Money podcast. But you don't have to stop learning just because we've stopped talking. Hop on over to our website at Bigger Pockets Money. We have calculators, resources. Scott is going crazy figuring out all of these new things he can make for the website. There's new things every day at the Resources resources tab. So biggerpocketsmoney.com or biggerpocketsmoney.com resources where you can find all the fun stuff Scott's creating. All right here. Scott Trench, I am Minnie Jensen, saying, see you soon, loon.