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- [00:00]
A
So you're 50, you're broke, and you're thinking to yourself, retirement is just never going to happen for me, right? You are wrong. Today we are breaking down exactly how to get started. Even if you feel like you're starting from zero, we are covering actionable steps to take, mindset shifts and strategies to build wealth fast, even if you're starting later in life. Hello, hello, hello, and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me, as always, is my not quite 50 co host, Scott Trench.
- [00:34]
B
Thanks, Mindy. Great to be here. I'm so excited to help Gen X 10X their wealth. How about that one? We are thrilled to welcome the ultimate experts on starting your financial independence journey in your 50s, Jackie Cummings, Koski and Bill Yunt, host of the incredible podcast Catching up to Fi, which we will definitely talk about as a great resource along this journey. If you are getting started and you want to catch up to financial independence, if you've ever wondered whether it's too late to pursue fire or felt discouraged about getting a later start, these are two people who are living examples that financial independence is absolutely achievable at any age, no matter when or where you're starting. I am no expert on the journey for someone who is in their 50s, getting started and broke and trying to build wealth. But I have studied relentlessly the journey for someone in their 20s, and I've attempted, I've hypothesized here today how that journey can be translated to someone who's starting over, who's totally broke, maybe in a really tough situation at 50 years old to try to maximize their wealth. And we're going to test that hypothesis and get the feedback from the pros here with Jackie and Bill on today's show. So welcome to BiggerPockets Money. Jackie and Bill, so grateful to have you here.
- [01:43]
C
Hey, thanks for having us, Scott. Glad to be here.
- [01:45]
D
We are excited to get this story out there to the larger audience of late. Starters, you know, the average American, the silent generation.
- [01:52]
B
Absolutely. This is a presentation. I am no longer constructing board decks in my CEO job, so this is my outlet for it. Thank you for giving me a chance to keep this skill alive in my life here. I've created this Persona. I called her Barb. I thought this is a really tough situation. What's one of the more, more extreme ends of the challenging situation that someone could find themselves in at age 50? And this is someone with literally $0 to their name. They're 50 years old. They have no assets. They also have no debt. This person may not feel like they have a very marketable skill set in the marketplace. Maybe they've been a stay at home mom for the last 25 years and has recently divorced and that's why they're starting over with very little. This person is scared. This person is not a money expert. She worries that she will not be able to make money. She's not confident in how to invest money. And she doesn't even really know or how to even begin getting started on this journey. But she is willing to reset, to really make a hard pivot and go after a financial goal and really commit to big changes in her life to maybe change what I imagine to be a pit of fear in the stomach around money and around impending traditional retirement age. So, Jackie and Bill, how am I doing here? How representative is this of one of the more challenging situations for someone in their 50s?
- [03:04]
C
Well, I think it's very representative of what we see working with late starters. She's 50. A lot of people in our community are late 30s. There's a 40s or 50s and we do have a lot of divorced people or for other reasons. They have restarted or needed to restart. I don't know, maybe they're an immigrant, maybe they went to some other big life change or they were just lifing with kids and they wake up and they say, oh my gosh, I'm way behind. And sometimes it's more in the head than reality. But you might have somebody in their late 30s that is just starting over. I think it's very reparative. Representative. What do you think, Bill?
- [03:43]
D
This is an avatar that is very common in our audience. You know, my previous co host, Becky Heptig lived this journey. Her story, which is episode two on our show, she went from zero to 1.3 million between 50 and 63. Starting with zero debt and zero assets. It is entirely possible. So Barb exists. And for me, you know, I started with a low net worth. Heck, I didn't even know what my net worth was at 50. I didn't pay attention to anything. I was living paycheck to paycheck. I was spending first and saving last. A lot of late starters are similar to this or they have a life changing event like Barb has should she have gotten divorced. And our audience is about 75% women, last check. And there's a lot of people in our Facebook community that are divorcees and trying to figure this out.
- [04:31]
B
I'm glad that this is a accurate representation of the journey for A lot of folks. But I also want to call out that I believe that this would be a bottom 5 or 10% in the community in the terms of net worth for someone in their 50s. Many people in the community will also start out with advantages that are past this, that are not broke, that have some amount of money, some amount of capital, and can move to later steps in the journey. So some of the very hardcore elements that I'm going to bring in there, because I think that's, that's the reality of the situation, we have to go pretty hardcore, at least to jumpstart this journey in the first few years. Those can be skipped if you are one of the folks that maybe have the privilege of having maybe a 50 or a couple hundred thousand dollars in assets, which is around the 50th percentile for this cohort.
- [05:13]
C
Scott I think that's a really great point because one of the advantages that a lot of late starters have is even though they might not have saved a lot, they have saved something. So many of them are not starting at zero. Maybe they just did the match, or maybe they just did a little something and they believe it's not much at all. But, you know, even if they got fifty thousand or a hundred thousand or something, it's better than zero. So, yeah, Barb has nothing, but I think the average person has a little that they just realize is not enough. But that's a great starting point.
- [05:44]
B
I have kind of the six themes that we're going to be talking about for this. Those are going to be acknowledging where we're at, both emotively and financially, staring our numbers down and looking at where we're at, understanding where we're at emotionally in our life journey. We're then going to set goals. We have the big goal of a million bucks in 10 years, which is going to seem impossible at first, but we're going to get there with proximate goals that are much more achievable along the way and show how the achievement of those proximate goals will set the stage for explosive opportunities or the chance to really get ahead. And I believe that by the end of this video or podcast, depending on whether you're watching or listening, you will see how those opportunities can work in a compounding way for you. We're going to teach you to measure and track. You've got to, again, stare down reality and understand where you are today and track your progress across the journey. You can do that in a spreadsheet or with software tools. Today we're going to provide a specific detailed action plan. You can think of this as a financial plan, a version of a financial plan, a draft financial plan. At some point you may want to talk to a certified financial planner. Jackie is a certified financial planner here with us today, but she is not your certified financial planner. So always know that that is a disclaimer we have there. I believe that Barb is going to have to use housing as an element in her journey. I do not believe she has an option but to use some kind of housing hack or turning her home into some income generation stream at some point in the journey. I believe it'll be very difficult for her to get to the million dollar mark without using that in combination with general best practices for saving and investing. And then we're going to talk about community and learning. It's really hard to do this journey on your own, especially if you feel like you're isolated or starting over. And there's resources out there that can help you, encourage you in your ear while you're at the gym or driving to work or doing chores or whatever. And there are real people and real communities that are getting together in person or on the Internet that can help turbocharge that journey. I want to just put some things on the table here. Barb is probably not going to be retiring very early. We're not going to get rich overnight here and it's going to feel very slow in the first couple of years. The magic of compounding works when you have asset base and we don't have one here, we don't have a big income. And the magic of compounding on the income front is really challenging in the first couple of years as well for a lot of folks. I will say that the traditional and comfortable retirement at 65 and or a million dollars at 60 is still achievable. But Barb is not going to be happy with her first job on this journey. She's going to temper expectations and eat some humble pie probably with her lifestyle as well as part of this journey in transition. And one of the first sacrifices I think Barb's going to have to make is going to be with her housing whether or not she house hacks like we alluded to here. Barb is not going to be able to live in an expensive place and maybe not even live on her own if she wants to really get the ball rolling in that first year or two. This does not get a roommate forever. But I am going to actually suggest that for the first year or so to get the ball rolling because Getting that first bucket of cash accumulated is so critical on this journey. What do you think, guys? Am I being too extreme or unrealistic on this one?
- [08:37]
C
You being real tough.
- [08:38]
A
You are being really tough. But that's the thing. We are in a situation where we have a $0 net worth and we're 50 years old. If we want to retire by traditional retirement age or by age 60, we're going to have to do some serious work. You can not take this path and work past 65. But what kind of life do you want to have and what kind of retirement do you want to have? And I think that Barb wants to retire by traditional retirement age, retire within 10 years, and that's going to take a lot of work and there's no getting around that one.
- [09:13]
C
The big important things here is that Barb has already done something right and that's to acknowledge that there's a problem and she wants to do something different. Like that is a big mindset shift that some people never reach their entire lives. So kudos for that. And I'm sure she's already beaten herself up and all those things, but she is on the right track to say, hey, I need to do something different. I'm committed to this. What do I do? And this is a tough conversation. There's no way around it.
- [09:42]
D
You know, this is a base case. It gets better from here. We have different starting points. Waking up for me, I Woke up at 50. I was a spender, not a saver. I didn't get it on the front end and we have to flip that around. You have to become a saver first and that takes a lot of work. And that's what we're going to do here today.
- [10:00]
A
Now we're going to take this quick ad break, but more for fast tracking to millionaire status by 60 after this.
- [10:08]
E
Finances can be messy and confusing, and it's a lot of work for many.
- [10:11]
B
Of us just to get to the.
- [10:12]
E
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- [11:23]
F
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- [12:07]
B
Let's jump back in. I love that you said acknowledge, Jackie, because that's the first step that I have here is just acknowledging where we're at. And I think it starts with emotions that one has. And I think emotions are a major driver of finance. Like most people get the basic concepts that I got to spend less than I earn, I got to increase my income and I got to invest if I want to build wealth. Those are not hard basics. Those basics are what we're going to apply here, hopefully reasonably creatively. But you can't even get started if you're afraid to look. Or there's these negative emotions that are unlabeled and not attached appropriately and head on to finances. And so these are some of the emotions that I thought folks might be feeling at this point in time. Fear, regret, doubt, anger, frustration, shame. Those are some of the negative emotions, for example, that I felt someone might be feeling here. What do you guys see in the community here?
- [12:52]
D
The emotions I had at 50, I was like, and I still struggle with them a little bit. This journey is not a one and done. I think we base a lot of our sense of money on negative emotions. It's hard to get to an abundance type philosophy and be optimistic. I mean, we're starting in a hard place and we've done a lot wrong, but we've also done a lot. Right, right. Jackie, for sure.
- [13:14]
C
And when it comes to Barb's case, okay, you said she was a stay home mom for 25 years. She's got some super skills from running a household, from being a mom and raising kids. I mean, all the skills that you get from that is amazing. So I don't want to minimize that. But also spending a mom to think about your strengths and your weaknesses, because you're going to lean into your strengths and say, okay, this is what's going to get me out because I'm really good at this or I have this amazing network or whatever. And the weaknesses, can you work on those? You know, how can you sort of maneuver around those so that they can benefit you a little bit or at least not be a drag on what you're trying to do. So those are a couple things that I just think is always worth mentioning that we all have strengths, we all have weaknesses, and some things are even superpowers that help us get defy.
- [14:02]
D
The thing here is with a 10 year Runway, you've got to get through these mostly pretty quickly. I was an analysis paralysis for a year. I felt like I had to read all the books. You see them all in my shelves right here. I felt I had to be the type a doctor that knew everything before I got started. You don't really need to know everything. This is an iterative process where you may still make mistakes along the way. But the important thing and the emphasis in late starter is on starter.
- [14:30]
A
Absolutely.
- [14:31]
B
And this is not a overcome these emotions. This is acknowledge them, label them, put them in a box, say they're there, know that they're there, and then you can begin the process of moving to the next next phase with it. And I think that next phase here is defining the goal. You need to have a clear written goal that we're going to back into and it's there and you need to review it regularly. And it doesn't have to be this goal, but the one that I'm using for Barb here is I'm going to have $1 million in net worth. I should say by 60 or you can use 65, whatever that is for you. But we're going to go with 1 million net worth by, by 60 for Barb. We want that number because that will allow Barb, per most traditional financial planning rules of thumb, to spend $40,000 per year in then inflation adjusted income in perpetuity. That's a safe withdrawal rate. We can get into that when we talk about that. In detail in many other episodes in our show. That may not seem like a ton, but that should put a big dent in that fear of not having enough to get by with some comforts in traditional retirement. And remember, we're also going to be earning income over the next 10 years. The situation will be better than that. We'll have Medicare. We'll have Social Security. We may have a couple of other assets. If we're creative and you agree with some of the housing bets or superpower bets that we can make along that journey. This is the goal that I think is a good baseline target for Barb and should make a big dent in. Again, moving away from these emotions that we just discussed on the last slide.
- [15:51]
C
I think the $40,000 is a very realistic goal. That was actually my final number. I worked a little bit longer to create more of a cushion, and it also will obviously be dependent on where you're living. You know, if you're living in LA or New York, probably not. But if you're living in Ohio, South Carolina, Tennessee, a bunch of other places, $40,000 is reasonable. And it just comes down to, you know, what. What is your lifestyle like? And I. I feel like a part of this defining the goal is, I know you guys got some great tools. It's like, sort of play with the numbers a little bit. So let's say you want $50,000 a year. Okay. How much do you have to save to get there? So I think sort of acknowledging that, hey, you can have a bigger number, it just requires a bigger income or a bigger savings rate. And that, to me, going through that stuff in your head helps a lot, looking at these different scenarios.
- [16:41]
B
All right, so step three is going to be measuring and tracking your money. This is the part where we stare down reality and acknowledge exactly where we're at. So first, we need to begin tracking and measuring every dollar that is spent. I can hear people complaining in their minds that this is, you know, not fun. Nobody likes doing this. I don't like doing this. Mindy doesn't like doing this. I haven't asked, but I know Jackie and Bill don't like doing this. This is called accounting, right? Nope, nope. No business likes to do accounting either. It's just, you have to do it. Everybody has to do it. Whether you have no money or you have a ton of money, you have to understand where things are going. You can use a variety of tools. There are a ton of free budgeting spreadsheets out there. There's a ton of free budgeting apps out There, Mindy, and I recommend that you use an app as a piece of software to do this. One free app that's out there is called personalcapital.com mindy and I have a preference for monarchmoney.com monarch app. And what these apps do that's so powerful is you don't have to download a bank account statement. You can just hook up your bank account, link it up to the app, and it will automatically track and categorize many of these expenses. The AI in these apps is not perfect. It will not always recognize that your trip to the, you know, the supermarket was for groceries or whatever it is. So you will have to do some work. But it dramatically lessens the workload here. And one concern that I get from a lot of folks who are maybe getting started later in life is a lack of trust around this data. And I will say that the advantages of having this data in one place, these are tools that many of us use. Jackie and Bill, do you use automated apps to track your money as well?
- [18:13]
D
Great minds think alike. Because I use Monarch money, I find it incredibly useful. It tracks your net worth. It tracks all your expenses. You know, where there's blips in the radar. And I could talk to my wife and say, we're eating out too much. We need to cut that back. You know where your money's going. I don't budget in a forward sense where I'm putting an amount on something and if I go over it, I feel bad. I'm budgeting in a backward sense because I know if I've saved my 40% first, I can spend the rest, and I just need to track where it's going so I don't overspend so that I can't save.
- [18:47]
C
For me, I may be like one of those people where I don't necessarily like connecting all of my accounts and things like that, but that's only because when I first started, these apps didn't exist. And it's in a spreadsheet that I have, and I've just kind of made it into one big hairy spreadsheet with all these tabs at the bottom. So that's what I'm used to now. I am not the budgeter either, and I will maybe throw out an alternative when I, you know, try to come up with how much I was spending. I just looked at what my gross income was, and then I subtracted what I was paying in taxes, and then I subtracted what I was saving and investing, and whatever was left, that was what I was Spending. So that's a great high level thing. And doing it that way, the one extra thing it gives you is that it's going to capture everything. Because when you're doing line by line, I feel like people sometimes forget, like they'll forget about the dog food or the car washes or these subscriptions. They'll forget to list that in their budget. And the apps obviously help, but I sort of did the backwards way I wanted to mention. Credit score, especially for someone coming out of a divorce, know where you stand when it comes to your credit. You might need a credit card. Having good credit, you know, is going to only help you along the way. Not that you need to go and take out a bunch of loans or anything, but know where you stand with your credit.
- [20:02]
A
Yeah. And if you had joint cards with your spouse and they had good credit, then that's currently your credit score. So open up a credit card in your name before that all goes away, if possible.
- [20:12]
D
You can't calculate your fire number or your retirement number without knowing what you spend. You know, track it granularly for three months, multiply it by four, or do it the way Jackie did in a big level way. But you've got to know because if you don't multiply your annual expenses by 25, you don't know where you need to get to go.
- [20:30]
B
Now that we know where we're at and we've talked about acknowledging our emotions, setting a goal, now we need to figure out how long is it going to take me to actually retire. This is a really powerful article, a piece of thought leadership written by a really famous, I guess, financial blogger in the world of early retirement called Mr. Money Mustache. And it's called the Shockingly Simple Math behind Early Retirement. You should go Google that and read that article as a follow up to this episode if you haven't part of that learning journey. But the math behind early retirement is really a function of one number, which is your savings rate as a percentage of your take home pay. And what the math shows is that if you're saving 10% of your income, it's going to take you 51 years to retire. We don't have 51 years in this particular journey. If you can save 20%, you shave 14 years off that journey, it takes you 37 years to retire. If you can save 35%, it will take you 25 years to retire. And if you can save 50% of your income, it'll only take you 17 years to retire. 55%, it'll take you 15 years to retire. So we are going to work, work on helping Barb get to a 50% savings rate. And I know that Bill and Jackie will think that's very aggressive and it is very aggressive and it's going to be particularly aggressive in the first few years. And we're going to have very little income potential in there. So we're going to have to be pretty extreme. The good news is we don't have to sustain that the whole way to early retirement just on income minus expenses. We just need, in my view and the plan I'm going to provide to use a very extreme first year or two to jumpstart the accumulation of cash so that we can play more fun or more rewarding games with some investments in particular, including housing, and we can move up the savings ladder in lumps on this. So this is the foundational math to early retirement and we'll be guiding our journey here. All right, so this is the plan that I have here. In a nutshell. We're going to build to a million by drastically cutting our spending. We're going to accumulate as a first phase $25,000. And that's going to be really challenging. And that's just going to be work. We're just going to work, work, work and spend as little as possible to accumulate that first $25,000 and get the snowball going. Then we're going to use that to help us jumpstart our income journey. One of the phenomenon in building wealth is that it's very difficult to go through a career progression quickly enough to get to a million bucks. The million dollar net worth that we want to do. If you're starting at an entry level job, I believe that having $25,000 and a very low savings rate will allow Barb to take on opportunities that would not be available to her counterpart, such as a sales job or something at a startup, or to even begin thinking about building her own business. Those are all much easier undertakings. If you have a very low spending rate compared to somebody who is spending every dollar that's coming in and does not have any of this Runway, any of this cash with which to explore opportunities. And from there, as we're able to scale our income, which will be the focus, focus for the first three or four years, is really ramping that as much as possible. Then we're going to talk about building an investment portfolio that will begin as an accumulation portfolio, very aggressive investment strategy, and will rapidly shift it as we move towards our target to a more conservative retirement ready portfolio where Are we.
- [23:34]
A
Encouraging Barb to keep this 25,000? Are we asking her to put it in the stock market or to put it in investment accounts, or are we asking her to accumulate this, this in cash in a high yield savings account?
- [23:47]
B
So this is where I'm going to be a little more radical, right? And this is why I wanted Jackie and Bill on the show in particular is because I'm going to say, don't invest this first 25 grand, just put it in cash. You need a buffer against the world because here's the thing, I call it the first 25,000 is the hardest because let's remember who we're talking to here. Barb is an entry level worker, right? In this situation, her first job is going to be 43,262 a year on average. That could be 62,000 if you're in LA or Manhattan, or as low as 40,000, depending on where you live. If Barb saves 100% of this $40,000 over the next 10 years and invest it, she's only going to get to $700,000. And that's if no other dollars are spent. It's an income problem fundamentally on this journey. And I believe that's where you have to focus. And I think that that $25,000 in cash used creatively by Barb, who is working very hard, studying finance and economics as much as she possibly can in that first year, living frugally and really thinking about how do I use that to create the next opportunity that's gonna be much more advantageous to her than even taking advantage of those first few layers of catch up contribution limits, which I think are a very tempting distraction for Barb on there. We're gonna do that. Like I'm a very big fan of those. We're gonna do that. But I'm just saying hold off on the first year on those and build this in cash because I think that the opportunities that we're gonna create with that cash are gonna be more advantageous. But I'm interested to see what pushback I get here from Jackie and Bill.
- [25:12]
C
I think creativity is the key. So I really love that you are thinking out of the box. Okay. I guess some things that I would add. So in the early years, her low income years, her low earning years, I would want her to seek out opportunities or resources that might be available based on her low income things like maybe she goes back to school, even if it's community college, to pick up a skill or more education. And with her income, she could likely Qualify for all her schooling to be paid for things like grants for college, you know, professional programs, scholarships. And I, I know of a program, the acronym is wit so it's Women in Technology and they have this amazing program for low income moms that have an interest in technology and they take them through this certification program so that at the end they have a sought after certification that could easily get them into a higher income job versus the lower wage, you know, entry level job. So I would add that and just creativity is the key and try to focus on something you really enjoy because it has to be something you want to stick with. And so if they're not into real estate or there's something they're not into, but somehow this is the way to go, they might lose steam, you know, six months down the road. So I want them to stick with it. Not only that, but to want to excel at this thing that they enjoy, that they're good at. And it's just giving them fuel.
- [26:46]
D
My mother was in this boat. She got divorced at 50, 55 and she had to go back and get her nursing degree. And she worked 12 hour shifts for 15 years until she was financially independent at 70. That's what she had to do. But the best gift she gave us was being financially independent. She doesn't need help from. It helps our financial plan. So getting yourself independent doesn't just help you, it helps those around you. And I completely agree that the first $25,000 is the hardest, but it's the most important because it gives you sleep factor, it gives you margin. You can breathe again.
- [27:22]
A
Yeah, that's a benefit that you cannot underestimate. Just being able to breathe again. Yes, you have your 25,000 and then here pops an unexpected expense. You're not stuck trying desperately to figure out how you're going to pay for that. You just take that out of your 25,000 and throw it over there and then rebuild your 25,000.
- [27:40]
B
I want to call out that after work or on the weekends. We're going to need to get a side hustle here as well. Again, this is the first year, the first 25,000 is really hard. This is capitalism. It's so hard to get on the other side of the snowball. We have to get it going and we have to push pretty hard for a long time to get that compound sound engine beginning. And that's what this first year is about. Side hustles are not going to be fun either. These are side hustles that I think are realistic, entry level, side Hustles for Barb here with Uber driving or bartending or freelance work or cleaning and landscaping or babysitting, tutoring and working events. Depending on the job that Barb gets or whatever, there are creative ways to earn more than the items on, on this list. For example, that's something to think about as you go on this journey. What, what are the ways that I can increase my, my income, both in my full time job, which is the most important item here, or the main source of income, but also with the side hustles. Because I do believe you can do better than the items on this page. But those will come with more specialized skills or the sacrifice, for example, of the night shift.
- [28:37]
A
Yeah. Or your specialized knowledge. Every one of us, everybody listening, all of us on the call, have a skill that we can monetize. What is your skill or skills that you can monetize? And you're an expert in something. Maybe you're an expert organizer. There are people who pay a lot of money to have somebody come into their house and organize their pantry, organize every aspect of them. I know this because I paid somebody to come to my house and organize and it was amazing. It's still organized because she came in and made my house look so amazing. So there are people out there who will pay for whatever your skill is. Maybe you're a great cook. There's so many things that you have that you can monetize and you can. I don't like the word exploit, but you can exploit somebody's need of your skills and get paid for that. So really take the time to think about all the things that you can do that you can teach, that you know, that you can make money off of.
- [29:33]
C
Mindy, I think that is so important. We all have things that we are good at that we might take for granted because we know how to do it. Like, for instance, you know, mowing the lawn. Okay, I hate mowing the lawn. I am more than happy to pay my lawn care girl to mow the lawn. Lawn for me. But some people might think who would pay me to mow the lawn? So think about things like that. Scott, you had mentioned tutoring as a thing. I'm thinking, Barb, she's got kids. How many hours has she spent tutoring her kids for free? For free. So this is an exercise for everyone to do. Think about the things that you have done, a lot of the things that you like and the things that you're like. You know what, this wouldn't even feel like a job. Or I've Done this for, for free. Wonder if somebody would pay me to do it.
- [30:20]
D
There are things. I was once a dj, so I dove back into podcasting. Reach back to your childhood and there will be things and skills that you can reapply.
- [30:30]
B
Folks are like, I can't find a job out there when I'm starting this position. And the reason is because they're looking for a $60,000 job. That may not be the reality at this point. That's the humble pie piece of this. We got to take this entry level job and it's not enough. It's not enough to get to our goal of a million and have a comfortable retirement, but coupled with a side hustle and the commitment for a year to really accumulate and spend little, it is enough to begin getting close to accumulating that first $25,000 so we can move into a slightly better situation and begin the compounding of this journey. And that's what I'm trying to emphasize here. The goal should be to stay in this position for as little time as possible. We do not want to be in an entry level job for the next 10 years. We do not want to be earning $15 an hour with our side hustle, hustle for the next 10 years. We want to advance those dramatically. This is a starting point and we're going to start here and we're going to look for opportunities to advance that.
- [31:19]
C
This is a temporary state. We get the question on our podcast all the time, what if you're low income? And I always follow that up with a question to say, is that a permanent state? So we might have to think about how can we get you out of that low income bucket and move you up. Is it getting a certification? Is it working on your skills? Is it going back to school? Whatever it is, it's probably not a permanent state. So what are you going to do to try to move the needle on your income? Because it's hard to do much of anything else if your income is so low to where you can't save anything.
- [31:54]
B
So we have to figure out how we can save not just a small part of our income, but the vast majority of that income. And this is where I think a lot of personal finance advice misses the mark. So this is a chart of average spending for one person households. It's two years removed, like a lot of BLS data. We'll see how long it's removed now that the director has been fired by Trump. But this is the data from two years ago. On it, an average one person household in the United States of America, one person household spends $46,000 a year. And if you look at this chart, 40% of that 39% is in housing. Another 14% is in transportation. Another 12% is in food. So if I want to cut back on my spending, should I focus on the smallest buckets, which is my entertainment expense or the largest? That's obviously a leading question. That's intentional. We're going to focus on the big buckets. Housing, transportation and food. If we control those three categories of expenses, we are going to get ahead and we're going to accumulate a lot of money very quickly. And if we can find a way to do that agreeably, we're going to lower the amount that we need in our retirement portfolio very substantially. And it's going to make that million dollars go a really long way for housing. There is no easy answer for someone who is broke on the housing front. We're going to probably have to downgrade our housing and we may even need to get a roommate or find some sort of arrangement that is roommate, like in this first year, in order to save as much income as possible. The car, we're going to downgrade our car and we're going to drive an older economy vehicle for the next few years at the very least. And we're going to start meal planning every week. Buying healthy food in bulk. Healthy food is not killing Barb's budget or ability to save. It's probably eating out that is killing that. If we can control those three expenses and we can eat out some on this, this is, you know, that's the smallest of these big three expenses. Then we can still spend on entertainment, we can still spend on clothing and education and all the miscellaneous things that make life enjoyable on a day to day basis with the relationships that we care about. But we have to control these big three expenses. And if we don't, we're going to find it very hard to accumulate anything, even if we work our full time job, a really hard environment that I discussed earlier, and we have our side hustle. So what's your reaction to that, guys?
- [34:04]
D
We lived in the big doctor house. It was bigger than we needed. And one of the hardest things we did was downsizing, but it was one of the most grateful and biggest levers to pull. It was amazing. And then as far as the cars, we were driving expensive cars, we were leasing them, we were, you know, had payments on them. If you can afford the payment, you can afford the car, right? Wrong. Buy a car in cash and buy an Older car, it's going to get you from A to B and a car doesn't need to do more than that. I fully agree with you Scott. And also those small leaks in the bucket do add up and I would say that you need to comb through say your subscriptions and your utilities and other expenses where it's like, you know, I can get rid of that, that and that I can decrease that, I can renegot. Appreciate that. Then all of a sudden the small leaks add up to a big leak.
- [34:49]
C
Yeah, I think grabbing the low hanging fruit makes sense because everybody likes little wins. Some things are so easy you could do it in 15 minutes. So you know, reshop some of the things that we take for granted, you know, like your house and car insurance. Most people stay with the same company their entire life and they never change that. Things like your Internet, that's an easy one. Pick up the phone or start shopping around and see where can I get this cheaper. So, so those things can add up. But, but I do appreciate that you started it with some of these bigger things. And I just like to focus on cutting smart and not just cutting. So when it comes to the car, like our case study here, Barb, it said that she had no debt, so we're assuming that she owns her car. Okay, so is it going to make sense for her to get a cheaper older car? Well, is that car going to cause her more in maintenance than keeping the paid off car that she has? So think about that and everyone that's, you know, starting this whole process, they're going to be a little bit different. But for Barb's situation, I wanted to do the smart thing with the car and not just the general advice is, you know, go drive a 15 year old car. If your car is paid off, do a little bit of analysis cuz the getting the older car might end up costing you more if the car you have is already paid off.
- [36:02]
B
Yep, love it. I'm speaking to an average, there's going to be clear quirks in people situations like that. Like of course, course you might have a car and that's paid off, then you drive that as long as it's not some very expensive to maintain type of vehicle, in which case it might make sense to sell it and move to an economy vehicle. But yeah, absolutely love that point.
- [36:18]
A
Tagging off of Jackie's comment about getting quotes on insurance and Internet and things like that. J Money over at budgets are sexy. Had an article a few years ago called Challenge everything and in one year he cut over $5,000 for from his expenses simply by challenging everything. So if you just want to Google budgets are sexy, challenge everything. You'll find that article and it's really a great read. I'm going to push back on the housing, Scott. Similar to what Jackie said about the car, maybe Barb got the house in the divorce. Or maybe Barb has a house with a super low interest rate and in that case it doesn't necessarily make sense for her to leave that and go to what you're calling a cheaper rental. In many cases, the downsized property because interest rates are higher because property prices have gone up so much. Maybe the downsized property is more expensive than the current one. I actually know a woman who got a divorce, got the house in the divorce, and said it's too much house for me, but I can't move because anywhere I move is going to be a more expensive monthly payment than the one that I already have. So, you know, definitely these are great guidelines, but make sure that these, these guidelines apply to you. And the one last thing I want to push back on is that last bullet point. Scott, Are you suggesting giving her a thousand dollars a month as fun money?
- [37:40]
B
I do.
- [37:41]
A
Okay, so that's like 30% of her income.
- [37:44]
B
And here's why. Because if Barb is actually going to get a roommate, drive an economy car, and pack her lunch every week, and she's actually going to work this job full time and have a side hustle, then she needs to have a release for this. She should allow herself to have some fun. That bucket can include some of the items in these categories, by the way. You know, entertainment, apparel, services, education. But there needs to be some release along this journey for this first year. And the major win is housing, transportation, and food. The minor win is in this. And so I think there should be a reasonably high allowance for something fun, whatever it is that Barb enjoys doing with her free time.
- [38:23]
A
Okay, I'm gonna say, Barb, be real careful with that $12,000.
- [38:26]
C
Well, I think Scott might be making the point that you're not married to the thousand dollars or twelve hundred dollars a month necessarily. It's almost like a slider bar. Okay, so if you save more in other areas, maybe you can have more fun for your fun bucket. And Mindy, your example of the housing, that is exactly what happened to me when I got divorced. I did end up with the house. Of course, there was hardly any equity, but my mortgage payments have been about $1,200 a month. And this is a four bedroom, nice neighborhood. Fenced in backyard and all of that. However, when I looked around for apartments, if I got a two bedroom apartment that was going to cost me at least 1500-2000 dollars. And so my immediate move was to stay put. But you got to do the research, you got to do a little work and kind of run some scenarios to say what makes sense. So don't make, make the broad assumption that it's always cheaper to move to a different place. And then also the cost of living area that you're in, if your kids are grown, you have the flexibility to move. That might be a consideration as well because I happen to live in a low cost of living area and that has kept my housing costs down.
- [39:36]
D
Yeah, I agree. Geo Arbitrage is one thing in housing that we don't talk enough about. We move from Illinois, Chicago to Tennessee and we're here in Knoxville and you know, the property taxes were down by, you know, four fifths lower and the cost of housing was much lower. And from state taxes, a 6% income bump just because we weren't paying state taxes anymore. So Geo Arbitrage is another way of decreasing your housing costs.
- [40:01]
B
Absolutely. Yeah. Moving from, you know, Los Angeles or Manhattan to a much lower cost of living area, that's going to be a huge game changer. You can keep the income consistent, for example, with remote work. All right, we're going to take our final ad break after this.
- [40:15]
E
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- [40:19]
B
Of us just to get to the.
- [40:20]
E
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- [41:31]
F
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- [42:26]
A
Thanks for speaking with us.
- [42:27]
B
The goal is $25,000, right? I think that's the first milestone. It's going to be a grind. If we're starting in Barb situation, we don't have any of the advantages we're talking about there. Hopefully many people will be able, maybe watching this will be like I have $25,000. I can get to my hands on $25,000 and you'll be able to skip some of those steps or maybe not have to go quite as all out as Barbara. In our example here, I'm suggesting put this in a checking or savings account in cash or equivalents after paying down any bad debt. If you have any bad debt, take care of that before you even begin considering a big commission. That's $25,000. Take any obvious wins. So if your employer has a 401k match, take that. But otherwise don't invest in stocks traditionally quite yet. And we're not going to invest in retirement accounts in this first year outside of that 401 match because we're going to use this cash to create a buffer against the world and we're going to enable two key opportunities. One is the house hack and the second is a higher risk, higher reward career path. And of course some of these would not apply in specific situations. So know if you are a specific exception to one of these situations. So the house hack is going to be, I think, a critical milestone on this journey. So let's go back to the example of Jackie, your house with the four bedrooms after you got divorced you had that house, you were not in Barb situation, you had some wealth at that point in time and a good career trajectory and incredible income potential. Is that correct?
- [43:42]
C
Correct. I was working, so I was a working mom, but I didn't have a whole lot saved. I mean, after the divorce, I might have been around between like 60 and $80,000 total net worth.
- [43:54]
B
So even at that point, I wouldn't necessarily say you needed to do something like this, but in Barb's situation, making 40 grand a year, Barb, if she has that house, she should get some roommates that pay her rent. In that situation, we rent out one or two of those rooms. They could be friends, they could be people she meets in the catching up defy Facebook community that need a cheaper place to stay, that offset to that income. Think about, you know, how far 6, 7, 800 bucks a month would go compared to the absolute grind that we're talking about with working for 15 bucks an hour here in some of these side hustles, how much faster we can accumulate wealth and offset our costs if we have something like that. That's what's called house hacking, right? Turning your house into an income stream. If Barb has a house, this is something to definitely consider. And no, no, nobody wants to have a roommate, right? Like, it's way better to not have a roommate than to have a roommate in almost every case. That's why it's so much more expensive. But if we want to accomplish our goal of getting to a million, I am saying that a roommate is a obvious and uncomfortable and direct way to get there. And one opportunity, again, is to do that with a house. Act now, if we don't have a house, then our goal is to accumulate this $25,000 and use it as a down payment on that first house hack. We will also have income considerations. Is this going to be enough income, this $43,000 plus my side hustle income, to help me qualify for a mortgage in my area, it may take you two or three years. You may have to raise that income from 40 to 50 or 60 or 70 or $80,000 over the course of a few years to qualify qualify. But as soon as we can, as soon as we can use that money to buy a property that can, we can rent out like a duplex or a house with extra bedrooms. Or if you're in a high cost of living area, there's often creative opportunities to buy a house that can be turned into an Airbnb or short term rental. And that's particularly advantageous in some of these higher cost living areas because they often have rules saying that only people who live in the property as a property, personal residents can actually put it on as a short term rental. And that allows like a cheat code for wealth creation. So those are things to look into. But the house hack turns this housing expense, which on average for homeowners is like 20 grand a year in this country and for renters is like 15 grand a year. It turns it into an asset. It's much cheaper from a cash outlay perspective to have your rent even partially subsidized by a tenant in your property. And it turns housing, which for most people is an expense whether you rent or you buy into a wealth creation machine that makes serious dent. I think I project a median American home of $415,000. I project that that person who house hacks that house instead of renting or buying will come out up to 150 to $200,000 ahead over a 10 year period. It's because of this house hack, for example. That's one of the reasons why I suggest don't put the money in the 401k in the first year or two because you want this cash to be able to take advantage of of this opportunity which will drastically increase your ability to accumulate cash and allow you to ramp and put much more in in years two through five into your 401. So what do you guys think of this? Bill and Jackie?
- [46:56]
C
So Scott, you have this well fleshed out Mr. Real Estate Guy, okay? And I love that because there are a lot of people that are very interested in real estate and you just laid that out very clear and concise. Now, for someone where they freak out if it comes, it comes to trying to deal with real estate or whatever, it might not be so easy. So there's other alternatives that you can do the same type of walk through, break even to try to get ahead. Now I also like diversification. So I know you said don't put anything in your 401k. I'm gonna, you know, be okay with at least doing the match. But I want something that is a little more liquid. I don't like the idea of, you know, sort of all eggs in one basket. And we are talking about a little bit more risk, a little bit more reward. So maybe you do the match in your 401k up to the employer match and then maybe you put a little something in a brokerage account in case you do want to use it for real estate or you do want to use it for something else. But I don't see why you can't be doing a little bit of both of these things at the same time.
- [48:00]
B
Fair enough. My response to the diversification piece is I believe diversification is super important once we get past, past six, $700,000 for Barb. But before then, I certainly am saying I'm going to concentrate all my bets in a few baskets. Those are going to be stocks and they're going to be in one or maybe two or three if we want, if we want to get aggressive of these house hacks, these properties that we'll move into, fix up and rent out to folks, and that will be my aggressive portion of my portfolio. Then I will begin moving to the diversification piece around years six, seven or eight. Because at that point we need, we can't have a highly risky portfolio. We need to actually transition to that stable retirement portfolio. But that's my, that's my thesis.
- [48:40]
C
Yeah, correct. So when I say diversification, I only mean more than just the real estate piece. Having something in stock, so not drilling into these stocks and start diversifying that way. No, I'm just saying having two things, real estate and a little bit in the stock market, that's enough diversification at the this point. As far as the allocation and all of that, 100% agree with you. Not necessary to dive into that at this point.
- [49:06]
A
Yeah. And Scott, in your thesis, Barb is renting out rooms in her house. Jackie suggested there might be people who don't want to be the ones who own the real estate. They could be renting out those rooms in a different Barb's house. There's different ways to do this. I mean, Barb's got to rent to somebody. So if you don't want to own the real estate, that's, you can still cut your housing cost cost by moving into a different Barb's house.
- [49:27]
B
One other thing I'll call out here is, let's say, let's say Barb is closer to the median or maybe even a little bit past the median in terms of wealth for a 50 year old and there is some cash that's available. A live in flip could be a good alternative to this where we don't have to have roommates. This is something that Mindy's done I think 10 times in her life. The advantage of this is let's say you buy a house, that $415,000 house that needs a lot of work. And you know, people in the California are saying I can't buy a house for 415,000. People in the Midwest are saying had 415,000. What kind of house is that? That's a mansion. That's the median for America. Let's say it needs a lot of work and you put in 100 grand into that property. Either you do some of that work yourself or you hire it all out and manage the project while you're living there. If two years go by and that property is worth 600 grand, that's a 75 or $80,000 gain that you can pocket on that property. Say you're able to get that gain after transaction costs on there. Maybe sales sells for 650. If you don't like my 615 example there, that's two or three years of income. Income and that's tax free if you live in that property for two years. So the housing component does not have to be a house act. But I highly encourage Barb to consider using housing as one component of the cheat code on this wealth creation journey because I think it will allow her to advance her wealth in lumps. You can imagine doing that two times over 10 years. Maybe the first one's a $75,000 gain and the next one's a $200,000 gain. That's kind of the game that Mindy has played and that alone alone made her millions of dollars over a couple of these live in flips truth. So the next piece, regardless of whether we are house hacking or not, these do not preclude one another is the skill set component. We talked about this briefly. Jackie has much better frameworks on this than I do. I was talking about self education, networking and intentional skill development. This is really a great place to focus. First, the intentional skill development component of this, especially in those low income opportunities in terms of advancing the skills gap and getting those hard skills that will get you that promotion at work. And this is going to be a relentless journey. It's going to start on day one and it's going to continue for the next five, six, seven years. And again, this will increase your income if you apply yourself very consistently over this. The next piece here is we do not want to stay in this entry level job here and we're going to rapidly advance our skillset. So after six months a year in the workforce, we're going to be looking to shop our salary or look for sales, equity or small business opportunities here. Barb should have a crystal clear expectation of what is needed for the next promotion or major salary increase at her job at all times. It is amazing how Many people will go five, 10 years without understanding this in their line of work. And the answer has to be crystal clear. And I know exactly what I need to do. Or you need to be looking for a new job. This is not A you have 30 years to figure it out situation. You gotta be on top of this in your market skillset. You're gonna spend so little and save so much that you're gonna also be able to to consider lower base pay opportunities. This is something that is a really hard pivot for people to make when they want to get ahead. In here, let's say that Barb's counterpart is making $65,000 a year and spends 60. Well, a job comes along that pays $50,000 a year, but has the opportunity to generate a $50,000 bonus if company meets its target or that awards equity. Barb's counterpart can't even consider it. It would be unfathomable to take a job that pays $50,000 when you're expecting expenses are $60,000. But Barb can take that job because she only spends 20 or $30,000 after making those changes that we talked about. And this is something that's hidden from most of the world in the workplace out there that Barb can begin looking for. And you don't have to win on all of these. You just have to win once or twice like I'd mentioned earlier, or on a handful of the the collection of these bets to really jump things ahead on this. So these long term payoffs in there, you can also take sales jobs or other things that have lower components or no components of guaranteed pay when you have a safety net and low expenses in the form of cash. And those are going to really ramp your odds. There is no guarantees in the income journey when you go down this route. Like there are guarantees on the expense side when you control your expenses. But it's all about odds and maximizing those opportunities. And again, I'll state it one more time for the people in the back. The less you spend, the more cash you have and the more relentless you are about self improvement in the development of your skill set, the more you will compound these odds in your favor and you will not be earning an entry level salary by year five on this journey if you apply yourself on this.
- [53:35]
C
Yeah, totally agree with that, Scott. And to sum it up, you're just talking about looking at total compensation and not just the hourly amount that you're getting. Huge deal. And some people don't think they have the luxury to do that. They want the immediate in their paycheck. But I know some people that some of the benefits they get, like you know, if you have student loans, it might be really attractive for you to have a company that's actually going to pay up to $5,000 of your student loans. My daughter, she gets some crazy benefit where I forgot what she calls it. But she can get anything for her home, office or whatever. I think that's $3,000 a year. So she can get a stand up debt. She can get all kinds of things for her office that things she might have gotten anyway. I maybe like a technology stipend or something like that. So some of these companies are getting very creative on what they offer you. So look at the total thing whether it's, you know, some equity compensation or other types of benefits that might go a long way. When you start to actually compare current job versus potentially new job, the new job may be better not just based on the salary but based on the other components that you mentioned.
- [54:40]
B
Good tips, awesome. All right, from here now we're going to talk about investing. Too many people start the journey here. You can't talk about investing until you have something to invest. That can be an income stream or an asset base. And right now we've got an income stream. I have these two orders of operations. So I have phase one for Barb which is as she's accumulating that first $25,000 or first, you know, working to that first house hack or actually scalable business opportunity when something can work on the housing and or the business front will shift to phase two once we got a much bigger gap in between our income and expenses and there's a big income stream to invest. But in that first period when there's a small income stream to invest, I am suggesting that we focus on building a thousand dollar cash buffer just to insulate you from the world. Paying off any bad debt, whether that's credit card debt or anything that's high interest taking free money like a 401k match and an employee stock purchase plan which is often offered at many companies that allow you to buy stock at a discount. And then we're building cash in a savings account or checking account during this first year. Don't prioritize the 401 or Roth IRA or all the, I'm calling them red herrings for this particular one here of the catch up amounts for folks that are trying to in the IRA contribution limits. Get that cash and get that gap invested in building the gap between your income and expenses. Then as soon as you've got that larger income stream or the first house hack or whatever and we don't have an immediate use case for that cash in a business or house hacking scenario, we're going to move to a more traditional investment order of operations here, which we'll start with. Once we have our six month emergency fund, we're going to maximize our HSA health savings account. If you have access to that and have a compatible plan, then we're going to max out the 401, the tax deferred plan. The revolution reason we're not going to do the Roth, we're not going to touch the Roth in this scenario is because we're going to have a lower income in retirement. Almost certainly we want to defer as much as we can now while we are earning money and paying taxes and realize that when we are in a very low income tax bracket in retirement. In Barb's situation, if you think you're going to be in a high income tax bracket in retirement, we will get into the Roth ira. But you're probably not watching this video because you're not broke at 50, most likely when you're not in Barb situation. So we're going to work on the 401k match or your equivalent, your tax deferred IRA, 457, 403b, those types of accounts here. Then after that is maxed out and you've put everything you can into there, then we will invest in the Roth and then from there everything else will go into after tax contributions. How am I doing, Jackie and Bill?
- [57:09]
C
I think you're doing great. The thing I like most about phase one is that when you're trying to move in the right direction, you finally got it together, inevitably something, something will come along and mess up your plans. And I don't want you to be thrown off if that happens. So that emergency fund is critical in phase one because I don't want anything to get you off of your game.
- [57:33]
B
Awesome. Do you agree with my order of operations in phase two as well?
- [57:36]
C
I think I'm good with just about everything that is there. And again we always go back to look at your individual situation. You know, be creative as you can, but, but as far as a guideline and some sort of starting point, this makes sense to me.
- [57:49]
D
After you get the housing piece taken care of and you have more cash flow to invest, get your emergency fund three to six months to protect your investments because you don't want to go dipping into that. And after that the order operations is Great. Max out the 401k pre tax for late starters. That's important because as you said, you got tax arbitrage opportunities here where you can, can, you know, take advantage of that later. And then an hsa, that's a big thing for Jackie. It's a big thing for me. It's a triple tax or quadruple tax benefit and we should absolutely take that. A Roth ira. I agree with that piece too. Don't forget the spousal contribution. If Barb happens to get a spouse later in life and then you know, after tax it help with a bridge to Social Security. So if you have the cash flowing down this water flow, you're going to get the there.
- [58:37]
C
One other thing I wanted to add Scott, is as she moves into phase two, I still believe you need to keep it simple. I think some people think that they need and like you said, some people immediately want to jump into investments. But I think that it can continue to be very simple. It's one of the few parts in our lives where simple is better and less work might actually help get you better returns. But if you keep tinkering with it and changing it and think that you need to hop from one strategy to the other, you really don't think simple path to wealth with JL Collins it could be just that simple. And if you just keep tickering with it, that might cause problems and it's going to take work to be doing that. So if that's not your thing, it's okay. Staying simple.
- [59:24]
B
That's what I got here for simple, right? For the investment strategy. I confusingly also call this phase one one and phase two. But I'm referring to two different phases on this slide than I was last one in phase one of our investing journey. And I'm going to use this up until we're five years away from the point where we want to retire or we're 80% of the way to our investment goal. This is going to be a very aggressive investment portfolio. We're going to have our six month cash savings position or whatever cash amount we're comfortable with. We're going to have have our house hack or house hacks or live in flips. And we're going to be in aggressive stock portfolios here. Think low fee index funds like voo, vtsax, vti. These are of course are just examples into the ether, not specific investment advice of course. And then when we get into phase two here, we're going to convert our portfolio from a very aggressive portfolio that is for an Accumulation stage portfolio to a diversified portfolio that is appropriate to a retiree. And an example of what this might look like is, you know, let's call it 45, 46% stocks, 26% bonds, we might have 16% international stocks, might have a rental property and some cash savings, might even throw some gold in there. At this point, again, five years away from the point where you want to retire or 80% to your retirement goal, that is a great time to hire your be only advice only certified financial planner CFP to help them construct a portfolio that looks more like this and less like this that is conducive to a traditional retiree. Jackie and Bill, how am I doing? How I'm comfortable making you with this level of specificity on investment approach?
- [61:06]
C
Yeah, I think you kind of have to know yourself, right? We've got a lot of great do it yourselfers out there. So if you get down with this stuff and you think you can sort of do this on your own, that is fine. Again, it could be very, very simple. Like for instance, do you even need the international, you know, some of the things, you know, you mentioned the goal. You might not need all of those little things, but if you are a do it yourselfer, then you could probably handle this on your own. Or you know, I'm kind of hot and cold with the whole target date funds, but a target date fund can get it done. For some people that want to be completely hands off and don't want to hire an advisor, this might be okay. And frankly most employer sponsored plans like 401k thrust savings account, they will default you into a target date fund if they have automatic enrollment. So it's not my favorite, but it's better than being in a savings account.
- [61:57]
D
Scott, I agree with your approach. I mean I think late starters with a 10 year span have to be 100% stocks. They have to get quickly comfortable with volatility in order to achieve growth.
- [62:07]
C
Growth.
- [62:08]
D
I do agree. Also within three to five years of retirement they do have to diversify because retirement portfolios are very different from accumulation portfolios. There's a lot of nuances there and you probably should talk to a fee only advice only financial planner so that you can educate yourself on how not to lose your nest egg in times of volatility.
- [62:30]
C
Yeah, and just to clarify, so I do have my cfp. I'm part of the financial planning world and so I do support the, you know, advice only flat fee, maybe something like Nectarina, whatever. So if you feel like you're not comfortable with doing these things. And you absolutely should seek out the appropriate professional. And there's a big difference in an investment advisor and a planner. The planner is going to look at all facets of your financial life. An investment advisor, they focus on exactly that, that investment. So make sure you know what you're looking for and what you want help with.
- [63:07]
B
By the way, a couple other points here. One, this 100% stock portfolio, let's say the market crashes and end of 2025 or early 2026, Barb is freaking going to freaking out over that. And that's a lot of, a lot of new investors freak out over. But remember, Barb has got nothing right now and she's trying to get to a million. A crash is actually going to benefit her in this scenario because the five or $10,000 dollars that she's investing in stocks right now might lose some value. But now she's going to be buying much more over the next several years at the lower price point. That crash is a disaster for Barb. If she's got $700,000 and her retirement goal is a million at that point, that's when we have a real problem here. So this diversification rule of thumb, this is not a cut over at 80%, it's a sliding scale. Right? That's just an example to illustrate this. If you're past 80% to your goal and you're 100% in stocks, you should be scared of that strategy. If you're 10% of the way to your goal and the stock market crashes, it won't feel this way, but you should be. The rational response would be to be glad about that because you're going to buy a lot more and you need that lower price point to help you accumulate more over the next couple of years. Just frameworks here to help out with that.
- [64:15]
C
Yeah, really good point, Scott.
- [64:16]
B
The last step here is community and education. This is a lonely journey if you try to go about it yourself. And it does not have to be. We are here. Biggerpockets Money and Catching up to FI as great resources. Subscribe to the Catching up to Fi podcast today. Tomorrow I join BiggerPockets money. We're good too for that. But Catching up to FI is specifically for you, Barb. That's all they do all day long, every day is tell stories about folks who are in your situation and how they are moving that journey forward. There's a Catching up to FI Facebook group I believe as well. There are other resources out there. There are dozens of finance books. Our favorite as A Fire community collectively, I think it's fair for me to say that is the Simple Path to Wealth by J.L. collins, which is a wonderful read and will greatly reassure you if you like audiobooks. He sounds like James Earl Jones, so it's a particular masterpiece there. You can get that from the library or Audible or Amazon or wherever books are sold. We've got our podcast here at BiggerPockets money and then choose FI is another great resource for the financial independence community and. And the R Fire Reddit community is also excellent. So what about you guys, Jackie and Bill? Any other resources you'd cite?
- [65:17]
C
Gosh, these are all the main resources I would use. So thank you for putting these together. They helped me on my journey in the early days, particularly Choose a Phi was the one that got me going.
- [65:29]
D
Yeah, I mean there are so many others. Afford anything with Paula Pant and stacking Benjamins with our friend Joe Salsihai. And it's supposed to be fun. And this journey, like you said, can be very lonely. You've got to have a community of people around you. We try and be there for the late starters. I think people get a lot of value from the Facebook group and we try and have dialogues with people. The Internet is a great way to connect with other like minded community members so that you are on the journey with others.
- [65:59]
C
Yeah. And I'll say this, sometimes the messenger matters. So if you're this late starter and you're trying to find people that maybe look like you, or maybe they're in the same field, like when I first started. One of the other podcasts that was extremely helpful was Journey delaunch Jamila Sifran. She was a black woman just like me. And that made a difference. So these days there is definitely someone that will speak to you. They may be saying the same exact thing of what we're saying right now, but sometimes the messenger does matter. Maybe it's someone that is divorced just like you, that's the host. So keep that in mind to find the podcast, the book, the resource that speaks to you. Maybe there's a special connection that's just gonna give you a little bit more motivation.
- [66:47]
A
Absolutely, Jackie. I could not say that better myself. And there is a voice for everybody. There is a soft voice, there is a more commanding voice. However you identify with, with somebody else is the best way that you're gonna learn. These are some additional episodes of the Bigger Pockets Money podcast. All of these episode numbers are gonna be in the show notes for this episode so you don't have to like try and write all of these down. But you can find all of these episodes on our show feed. And these are more stories with later starters to Fi, who made it there in about 10 years.
- [67:23]
D
Yeah. I would urge all the listeners today to find three to five people in their lives that might need this message because there are so many people outside of the 5 bubble that need to hear this. They might be ready for this, but they don't know where to start. Help them find a foothold into the door, into this world.
- [67:42]
A
And of course, every single episode of Catching up to Five podcast covers the late starter journey as well. So I didn't mean to ignore that part of you.
- [67:51]
B
And you guys will naturally discover all those resources and the specific people who speak to you. I love the way Jackie put that. If you follow, go down the rabbit hole in any one of these resources, frankly.
- [68:01]
C
Yeah. And let me just add for Catching up to five, one of our most popular series that we do is Late Starter Stories. We've got people from a variety of walks of life, different starting points, and I just love money stories. So we've got some fascinating money stories that is usually from a late starter point of view. So that's kind of cool. And then you guys do some amazing case studies too. So I think a lot of times that resonates with people when they can hear someone else going through their numbers, going through their story. It just helps to kind of hear out of the voice of other people.
- [68:33]
A
Absolutely.
- [68:34]
B
Well, on that note, I want to wrap up right. We today have attempted to create a plan for Barb, who is broke and starting over at 50. The core of this is going to be to dramatically and voluntarily cut spending by starting in the big areas of life and leaving some buffer, in my opinion, for the fun of life. We're going to humble ourselves and take an entry level job and invest long hours generating income by the hour in order to get this buffer against the world, this first $25,000. And at that same time, we're simultaneously going to advance our skill set. We're going to use this cash either to give ourselves a really good jump start in our career by taking advantage of opportunities that we didn't even think to look for, actually pay less but have more upside or that allow us to house hack. And we're going to apply that pressure until still our income is reasonably high, let's call it 75, 80 to $100,000 over the next couple of years. We want to ramp up to that. I think that would be an excellent target and our expenses are low, let's call them 30, $40,000 a year and we're able to have that big spread to invest each and every year into a very sophisticated and professional set of order of operations using the wonderful benefits of the 401k HSA and other tax Advantage retirement accounts on their, as we stated in the order of operations slide. That's the plan. And I believe that many barbs out there have a very realistic shot at generating a million dollars in wealth over a 10 to 15 year period. Not everybody. There's going to be some luck involved in this. There's going to be a really hard battle for the first three years, one to three years, I think, to really get on the other side of the capitalism snowball. But once you're there, I think there is a very realistic chance of rounding out that journey.
- [70:08]
A
I could not have said that better myself, Scott, so I'm not even going to comment. All right. Right. That wraps up this episode of the Bigger Pockets Money podcast where we helped Gen X 10X. He is Scott Trench. They are Jackie Cummings, Koski and Bill Yount from Catching up to Phi. And I am Mindy Jensen saying ciao for now, Brown Cow.