Mr. Money Mustache’s Simple Secret to Retiring Early in Your 30s

Summary

Podcast Summary: Mr. Money Mustache’s Simple Secret to Retiring Early in Your 30s

Podcast: BiggerPockets Money Podcast
Hosts: Mindy Jensen & Scott Trench
Guest: Pete Adeney (Mr. Money Mustache)
Date: September 9, 2025
Episode Focus: The “shockingly simple math” that can fast-track your path to early retirement, with practical insights from the pioneer of FIRE (Financial Independence, Retire Early)

---

Episode Overview

In this lively episode, Mindy Jensen and Scott Trench welcome back Pete Adeney—better known as Mr. Money Mustache (MMM)—to revisit and demystify the foundational math behind early retirement. Pete makes the strong case that the single most important factor determining your early retirement timeline isn't your salary or investment returns, but your savings rate. The conversation covers the straightforward rules, common objections, psychological hurdles, and practical approaches that have empowered thousands to work less and live more intentionally.

---

Key Discussion Points & Insights

1. The “One Number” That Determines Early Retirement

[01:16]

• Pete's Core Principle: The only number that matters is your savings rate—specifically, what percentage of your take-home pay you consistently save.
  • “If you are consistent in your behavior as you save for retirement and then after retirement, then all that really matters is what percentage of your money can you save.” (C, 01:16)
• The Rule of 25: Multiply your annual spending by 25 to find your “FI number” (the nest egg needed to retire).
• Shaving Decades Off: Increasing your savings rate dramatically shortens your mandatory working years.
  • “The more you save, you're going to shave decades at first... years with every incremental bit of savings.” (B, 01:51)

2. Responding to Common Objections

[03:21]

• Many listeners argue they can't save 50% on modest salaries.

  • Pete responds: “Congratulations in being like in the top 1% of the world's population, probably still even at US$50,000... It's possible to live on any amount of money... You don’t have to save 50%. You can save whatever works for you.” (C, 03:35)
  • The point isn’t to mandate sacrifice, but to honestly see your options and the trade-off between working years and savings rate.

• Savings Rate Calculations

  • Take-home pay is your net after taxes (not gross). Tax-advantaged accounts like a 401k count as savings since contributions aren't taxed.
  • “[A 401k contribution] becomes part of your take-home pay—if you’re not paying taxes on it, it’s already saved.” (C, 05:51)

3. The Chart: Visualizing the Savings Rate/Years Worked Math

[11:54]

• The “Shockingly Simple Math” chart lists years to retirement based on savings rates:
  • 5% savings = 66 years
  • 45% savings = 19 years
  • 85% savings = 4 years
• Mindy urges, “Google the shockingly simple math and... see, you don’t have to do 50%... Just realize what you’re giving up.” (A, 11:54)
• Pete: “It's shockingly simple and it's kind of exponential. The first bit of saving you do is very valuable... then it gets less and less important as you save more and more.” (C, 12:41)

4. Investment Return & The 4% Rule

[13:39]

• The shockingly simple math assumes 5% real (after-inflation) annual returns—conservative compared to historical averages.
  • “Never assume the future is going to be as rosy as the past because you want to have a safety margin.” (C, 13:56)
• 4% Safe Withdrawal Rate:
  • If you limit annual withdrawals to 4% of your portfolio, “it will approximately never run out.” (C, 14:48)
  • Based on the “Trinity Study” and decades of backtesting.
  • Social security, inheritances, and work flexibility act as additional “safety margins.”

5. The Seven Levels of Safety

[18:07]

• Mindy recaps MMM’s “seven levels of safety”:
  1. Primary income
  2. Backup income (taxable accounts)
  3. Optional part-time work
  4. 401k plans
  5. Social Security
  6. Lifestyle flexibility
  7. Work flexibility
• Pete affirms, “It's pretty hard to run out of money if you follow a 4% rule type of approach.” (C, 17:06)

6. Flipping from Frugality to Spendability

[19:57]

• The challenge: many in the FIRE community save aggressively, then have trouble relaxing their spending post-retirement.
  • Pete: “You kind of have to train the frugality out of yourself because it's possible to go too far in that direction.” (C, 19:08)
• The “sweet spot” is being intentional: frugal when accumulating, but not deprived when financially independent.
  • “Having a good time with [money]... still having a relatively high savings rate... and then just always check in with yourself.” (C, 20:17)

7. Why Spending Matters More Than Earning

[24:04]

• More income does not guarantee financial independence; it’s possible to spend it all (or more).
  • “Throughout our incredibly wealthy country, people seem to be able to manage to like, blow any amount of money.” (C, 24:04)
• Lowering spending has a “double effect”—it both lets you save more and means you need less to maintain your lifestyle.

8. Pete’s FIRE Journey & Philosophy

[26:37], [28:34]

• Started with a $44k salary, saving about 10% at first, but quickly ramped up to over 60% thanks to a dual-income household, efficient lifestyle, and DIY house hacking. FIRE achieved after 10 years.
  • “After that money started building up... investments are a form of passive income. So as soon as your investments cover your lifestyle, then you can quit your job.” (C, 26:50)
  • Notable admission: first car and motorcycle were splurges but “worth it” for overall quality of life without derailing the plan.
    • Humorous quote: “I would sell like my child before I took a multi hop flight within the US.” (C, 19:08)

9. The “Low-Income FIRE” Experience

[39:00]

• It’s rare but possible; most people see income boost over time with FIRE focus.
  • Pete profiles a frugal public school teacher couple who aggressively saved and built wealth through rental properties, but notes the upward mobility in the US often tilts the pool to higher earners.
  • “It's pretty hard to stay in a lower income unless you're really dedicated... The math still works. You just have to spend less money.” (C, 39:00)

10. Children, Lifestyle Inflation, and Insurance

[41:32]

• Children’s expenses are as “big or small as you want” (aside from emergencies), and raising kids frugally is viable—and often leads to creative, fulfilling upbringings.
  • Pete: “I like to joke that [my son] cost less than nothing because... his mom and I weren't able to go off and do the normal stuff we would have done...” (C, 43:44)
• Health insurance is less daunting than feared, especially with ACA & direct primary care subscriptions. As wealth grows, self-insurance becomes more realistic.
  • “If you think about, you know, Warren Buffett, he doesn't need a health insurance company to come in and pay his bills.” (C, 44:52)

11. Real Estate & Non-Traditional Assets

[51:02]

• For real estate, focus on net cash flow (post-expenses), not just property appreciation. Mortgage principal repayments add to your net worth.

  • “If the cash flow... is enough to pay for all your bills, then you're retired.” (C, 51:02)
  • Sell underperforming properties and focus on those that truly support your retirement.

• On speculative assets (e.g., Bitcoin):

  • Pete asserts cryptos are speculations, not investments, because they lack underlying income-generating fundamentals.
    • “Bitcoin is entirely dependent on belief... it's a speculation rather than an investment.” (C, 56:37)
    • Notable banter: “You're missing out an investment that could make your bloodline...” (B, 59:35)

---

Notable Quotes & Memorable Moments

• “The only thing that matters is your savings rate as a percentage of your take-home pay.” (C, 01:16)
• “You kind of have to train the frugality out of yourself because it's possible to go too far in that direction.” (C, 19:08)
• “More income doesn't help you if your spending is always going up faster than your income... It's the spending lever that matters the most.” (C, 24:04)
• “Having a high savings rate not only lets you retire earlier, but it also means you need less money to cover your future lifestyle.” (paraphrased, C, 24:04)
• “It's shockingly simple and it's kind of exponential.” (C, 12:41)
• “Bitcoin is like a dice roll that has just been continuing to come up on sixes over and over and over again.” (C, 56:37)
• “I would sell like my child before I took a multi hop flight within the US.” (C, 19:08)

---

Timestamps for Key Segments

• Main Principle & “Shockingly Simple Math”: 01:16–03:21
• Objections and Calculating Savings Rate: 03:21–07:08
• Savings Rate Chart & “Choose Your Own Adventure”: 11:54–13:24
• Investment Returns, 4% Rule, and Safety Margin: 13:39–18:07
• Seven Levels of Safety & Frugality Mindset: 18:07–20:17
• Why Spending Trumps Income: 24:04–26:13
• Pete's Personal FIRE Journey: 26:37–32:19
• Low-Income FIRE Stories: 39:00–41:08
• Children, Insurance, and Health Coverage: 41:32–50:31
• Real Estate & Portfolio Structure: 51:02–55:15
• On Speculation & Bitcoin: 56:37–60:17

---

Tone & Final Thoughts

The episode maintains Mr. Money Mustache’s trademark blend of tough love, humor, and practical optimism. Listeners are reassured that FIRE is accessible to those willing to take control of their savings and spending and are reminded that while the math is simple, sticking to it is the challenge. MMM’s advice is refreshingly direct: focus on what you can control, optimize your savings rate, and don’t get lost in the weeds of rare exceptions or speculative hype.

Everyone is encouraged to run the numbers for their own life, embrace the “choose your own adventure” aspect of FIRE, and remember that a well-structured, intentional path—however frugal—can lead to decades of freedom and financial peace.

---

Find Mr. Money Mustache:
“Just look for Mr. Money Mustache, you’ll find all the different versions of me. My favorite place is people reading the blog or joining the Bootcamp...” (C, 61:23)

Closing:
As always, Pete reminds listeners to enjoy life along the way—whether that means a fun car or a hike with your kid—and that the point of financial independence is greater happiness, not just a bigger bank account.

Transcript

[A]

What if I told you your early retirement timeline comes down to just one number? Not your salary, not your investment returns, not even how much debt you have. Just one single factor that most people completely ignore. Today we're going back to the basics on how you can fast track your fire journey. Hello, hello, hello, and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen, and to welcome and with me, as always, is my has a mustache, but isn't Mr. Money Mustache. Co host Scott Trench.

[B]

Thanks, Mindy. Great to be here. Stumbling along on our journey to financial independence. We are so excited to be joined today by Pete Adeney, but you probably know him as Mr. Money Mustache on our podcast. Once again, welcome to the show, Pete.

[C]

Thanks. I think I've been here before, so it's great to be back.

[A]

Well, welcome back, Pete. It's lovely to see you again, even though I see you frequently because we.

[C]

Live in the same town and that's a privilege.

[A]

It is a privilege. Longman is the best town in the universe and I've lived in a lot of them, so I can say that with confidence. All right, Pete, you have boiled down early retirement to what you call the shockingly simple math. For people that are hearing this for the first time, what's the one number that determines when they can retire?

[C]

The one number? Well, if we were going to make an actual number, I guess it would be the number 25. But the point of that article that we're talking about here, the shockingly simple math behind early retirement, is that the only thing that matters is your savings rate as a percentage of your take home pay. So in other words, your earnings is one side, your spending is the other side. But how much of your earnings are you keeping? And if you are consistent in your behavior as you save for retirement and then after retirement, then all that really matters is what percentage of your money can you save. And that's what determines how long your mandatory working career has to be.

[B]

I refer to this all the time because it's the basis for any calculation for how long one has to work. And the work begins here. And I think that as the years have passed and this community around the financial independence retire early world has swelled, people have both taken this too literally and not seriously enough. And there's kind of an endless amount of debate and confusion about various components of this, when really the point is the more you save, you're going to shave decades at first and then extra years, years with every incremental bit of savings that you get out of it. Is that how you read it as well, from your perspective?

[C]

Yeah. And the real part is just to put a very simple and easy target for people that's most valuable at the very beginning when you know nothing about retirement or finance or investing. And it's good to just know the basic rule. For example, if you're able to save half of your take home pay, then your total working career works out to about 17 years. So if you started at 20, you'd be able to retire at 37, start at 30, it would be 47, and so on. And later you go on to realize like, oh, it is possible to save 50% of your income. It's just not common in the United States. It's kind of cool to know that a working career does not have to be 30 or 40 years, like everybody says. And just that realization alone is why I wrote that article long ago. It's from more than 10 years ago now, because it just opens up a lot more possibilities that you can just have a lot more, you know, decades of freedom in your life than people assume.

[A]

So I have the ability to hear people yelling at the radio as they're listening to this, driving to their job and they're saying, but Pete, I make $50,000 a year. There's no way I can save 50% of my income.

[C]

Yeah, right. And I would say, well, first of all, congratulations in being like in the top 1% of the world's population, probably still even at US$50,000. And, and secondly, yes, it's possible to live on any amount of money. It, it gets more and more advanced, the skills and adaptations you have to make. But you don't have to save 50%. You can save whatever works for you. That's number one. And number two, does anybody make more than $50,000 in this country? If so, maybe you can be one of them too. You know, things change over time and that's the real thing. It's like the shockingly simple math is just the numbers that don't really lie. And then it's up to you to decide where you want to play within that, that set of numbers. You know, we're not really accepting complaints on this. We're just telling you what your options are.

[B]

Love it. And let's define a couple of variables in this. What do you mean by take home pay?

[C]

Oh yeah, that's a good point. So the reason I put that is there's all this stuff that's like income taxes are the biggest thing. So if you have $100,000 salary at least several thousand or maybe even tens of thousands of that is going straight to the irs. So, so we don't really count that in measuring your savings performance. So let's say you have 80,000 or 70,000 left after that. That's really the scorecard of what you're taking home. And then how much are you saving beyond that? So if you're saving 35,000 out of that 70,000 take home pay, then you have a 50% savings rate. And the reason that I do it that way is because once you're retired, at least in the fire community where we, we tend to focus on somewhat lower levels of post retirement spending, the income tax burden is quite low. Like most people who are living on a retirement income. Like the amount that I spend, if I was only earning that amount, I wouldn't really be paying any income taxes. And I encourage people to do that. That's my personal philosophy because I like efficient living. If you want to be more in this fat fire community, which is what we call higher levels of spending, then you do have to account for more income taxes in retirement. And the math changes a little bit. But at the same time you're living in such a bath of money that the details matter less because you know, you don't have to be very efficient when you have that much income to work with.

[B]

Can you just, just for clarity, explain how you know pre tax savings, like a 401k would work when calculating your take home pay?

[C]

Yeah, that's a good point. Well that becomes part of your take home pay, like if you're not paying taxes on it. So if you have, let's go back to the $100,000 salary and then let's say you're allowed to put 20,000 into your 401k, whether it's an employer plan or some other fancier variety that of course gives you a tax deduction. So then your remaining take home pay might be an additional 60,000 beyond that. So in that situation you have 80,000 of take home pay, but you're also saving a higher percentage of it. Right, because that 20k that went straight into your retirement account is already saved. You've saved 100% of that magic pre tax money and then you still have a bunch left over to save beyond. And then the math is going to work out that you're saving a huge percentage of your take home pay.

[B]

I'll also just chime in that once we get there, a lot of people then worry about how do I get that money out of the 401k. That's something you can worry about later as you get towards early retirement. But if unless you are again are in one of these super high income tax brackets in retirement, the fat fire world really it's not a problem in practice to actually convert that money either to a Roth or extract it from the 401k tax and penalty in a low tax bracket or penalty free at that point. Those are additional reasons that the community I think has built on this work and really, really found ways to make that very simple observation of accounts.

[C]

Yeah, that's definitely true. And I get questions from people a lot like that now, now that I'm doing a little bit of coaching on people are like, how do I retire? Can I really quit my job? I have all these savings. It turns out it's not a big deal. Even if you have a lot of it in your locked up retirement accounts because they're not really locked up, there's always a way to get it out. There's both tax options and there's just the order of spending options. Like if you have a bunch of money in a brokerage account or even if it's a savings account and then you cut your job off and you retire, then you can just use up all that other money first. Even if it takes you like through the ages of your 50s and then you hit zero right as you're like 60 years old, then surprise, surprise, your other retirement accounts then unlock for penalty free withdrawals at that point and then for the rest of your life, you know, you could just live off of the, the money that had been compounding all these decades while you were using up your, your previous savings. So there's always a way and I just encourage people not to worry about these details too early. Just focus on getting the savings rate right for now and of course mainly just enjoying your life while you're still young and make sure you are saving and then there's always going to be a way to sort out the details later when you're spending that money down your distant future.

[B]

All right, we're going to take a shockingly simple and short ad break, then we'll be back with more. Finances can be messy and confusing and.

[D]

It'S a lot of work for many of us just to get to the starting point in personal finance, which is understanding what you've got and where your money is going. That's why Virginia, my wife and I use Monarch Money as our personal financial commitment demand center for our bank accounts, our investment portfolio and as our budgeting and Spending Tracker Monarch automates everything. It's all linked and every transaction is automatically categorized into buckets of spending. In just a few minutes a month I have a complete picture of where every dollar is being spent and I get a real time update of my net worth whenever I open the app. I could not be more thrilled to be partnering with Monarch Money, but my favorite net worth tracker and spending Tracker here at BiggerPockets Money. I recommended them for years, ever since Mint.com shut down. Now, however, I'm excited to announce that BiggerPockets Money listeners get 50% off their first year with Monarch Money. Get control of your overall finances with Monarch Money, the app I personally use to manage my finances. Use the code [e-mail] in your browser for for half off your first year. That's 50% off your first [e-mail] with.

[E]

The code Pockets when it's cold in the New York area, we always want to go somewhere warm. Last time we stayed at an incredible Airbnb in Florida. We walked to restaurants and the beach. It was great. While on this trip I thought maybe someone can enjoy our home while we're away too. Have you thought about hosting on Airbnb like I have now? It's easier than ever with the co host network. You can hire a high quality local co host to take care of your guests and do the work for you. Co hosts can manage reservations, message guests and more while you could earn a little extra cash. Find a co [e-mail] host when I.

[B]

Evaluate debt funds, I look for things like first position loans, personal guarantees, deep experience by the fund operator, low fund leverage, fast liquidity and consistent returns. These are some of the reasons why I'm excited to partner with Pine Financial Group. Their Fund 6 offers investors exposure to real estate credit, largely for construction and rehab, largely here in Colorado, with loans originated by an experienced originator. With over $1 billion in origination volume, 75% of their borrowers have been repeat customers over 17 years. They offer investors an 8% preferred return paid monthly and a 70.30lpgp split of everything over 10% paid annually. The lockup period is nine months with liquidity available within 90 days. After that nine month commitment, the fund is open to accredited investors only. The fund's minimum investment is typically $100,000, but Pine Financial is able to reduce that minimum for some investors and have agreed to do so for BiggerPockets Money listeners to a minimum of $25,000. Full disclosure I am personally invested in this fund through my self directed Iraq. And of course Pine Financial is sponsoring this message and our podcast. If you'd like to invest or check out their Prospectus, go to biggerpocketsmoney.com pine today. That's biggerpocketsmoney.com P I N E. Please note that returns are not guaranteed and may vary based on fund performance. All right, we must ask you to join us back here on BiggerPockets Money.

[A]

I want to encourage people to run the numbers, do these different scenarios. Don't just hear this and and automatically dismiss it. Oh, I have to save 50%. That's a suggestion. Just Google the shockingly simple math and it will take you to this article and read the article. There's an amazing chart in there that shows you if your savings rate is 5%, you have 66 years to work until retirement. If your savings rate is 45%, you have 19 years. If your savings rate is 85%, you have four years. And there's a bunch of numbers in between. Look at this information and see. You don't have to do 50% like you said earlier. Earlier, Pete, you can, you know, choose your own adventure. Just realize what you're giving up. You are giving up more time at work than if you were to save a little bit more.

[C]

And it's shockingly simple and it's kind of exponential. So the first bit of saving you do is very valuable because if you save nothing, you're going to have to work forever, you know, or at least until Social Security or some pension or inheritance bails you out. And then even saving a little bit makes a huge difference. Huge bit. And then it gets less and less important as you save more and more, which means you can relax more and more because it's not going to make much difference anyway. But the problem is most countries, like including the US we have a very, very low savings rate. It's like something in the 5 or 10% rate. And that's why we end up with these perilously long careers where people are barely even able to go to work anymore because they've kind of signed up for such a mandatory career by saving so little when they were younger.

[B]

There's one side of this right in terms of the math, the shockingly simple math here, which is savings rate as a percentage of your take home pay. The other side of the equation, however, assumes a return rate, a real inflation adjusted return rate. What do you use there and why do you use it?

[C]

I think I used something that was on the low side of the historical returns of a stock market after inflation. You know, like just the, the whole index. I'm scrolling through the footnotes at the bottom of my article, but I think it was probably about 6% after inflation.

[B]

I think it's 5%.

[C]

Oh yeah, that's right. It's right at the bottom. It says assumptions you can earn 5% investments returns after inflation during your saving years. So that's a little bit lower than the historical stock market returns because we don't want to assume a continued boom like we've had for the last 50 plus years. And if we do get it, you know, like when I wrote that article, it was something like 13 years ago. And surprise, surprise, we've had an even faster economic and stock market boom since then. So people have earned more like 10% post inflation from their stock investments, which is why there's so many happy Mustachians like retiring with twice as much as they expected. But once again, never assume the future is going to be as rosy as the past because you want to have a safety margin. And then hopefully you'll get a positive surprise in the future as well.

[B]

Can you briefly touch on the 4% safe withdrawal rate? Is that something you use? You used personally?

[C]

Yeah, built into this chart. I mean, I tried to make the chart as simple as possible, which is like, how much do I save, how long do I have to work? But there's like math hidden beneath all that. And it's like there's, I link to the equation. It's actually part of like Jacob Fisker's book where he like breaks it down with all this math. But what it really means is that if you have a chunk of money that's invested in reliable long term index funds and maybe some bonds as well, if you limit yourself to taking out just 4% of the value or the initial value of that chunk of money throughout your life and it's going to fluctuate, but on average it's going to go up and it's also going to pay dividends and it will approximately never run out. You know, based on all the historical patterns of our country's economic growth, which means the stock market gradually going up, it's a pretty safe withdrawal rate, which is why it's called SWR or safe withdrawal rate. So to make that really simple, if you have $1 million and you shut off your switch of income and you say, I'm going to take $40,000 out next year for my first year of retirement, and then the next year I'm going to index it for inflation. I'm going to give myself a little raise each year. I'm going to look up the consumer Price index. Inflation was 3% this year, so I'm going to get like a 3% increase on my 40K. And you just blindly do that without even adjusting for anything. Even that is pretty safe. And the reason we use that number is because there was a bunch of studies, the most famous one is called the Trinity study. And a bunch of people have done backup research since then saying like hey, 4% usually works out for pretty long run. And on top of that people have a lot of safety margins. Like you're going to get Social Security someday if you live in the US And a lot of people get at least some inheritance from family members, parents as you get older. And by not including that in your 4% rule, those are your little additional safety margins.

[A]

Oh, okay. You just use the word safety margin. You link to another one of your articles in your shockingly simple math article, conveniently just above this chart that we're talking about. It's called, it's all about the safety margin. And you have in there seven levels of safety. And I think this is something that is not talked about enough. People are constantly worried about running out of money. Pete, have you ever known anybody who is early retired to have run out of money?

[C]

No. Everybody has tended to gradually have a bit more money than they expected for a variety of reasons. Some people keep earning income, which is like all of us have done in our post fire years just because we still have energy to do stuff. And some things make money. Some people have lived purely off of their retirement income, like the shirt I'm wearing. Our friend Mark has been very disciplined saying I am not going to earn money, I'm only going to work for free and I'm going to live off my portfolio. And even he has found too much. He had too much money in retirement, which just means he is more generous and has more fun than he had originally forecast, which is not a big problem. It's pretty hard to run out of money if you follow a 4% rule type of approach. And that's because that approach is already pretty safe. And then there's these additional things that most people have like inheritances or pensions or social securities or income that tend to just pile up. And you know, if you get to a million dollars of savings fairly young in your life, chances are you're pretty good at money and managing your spending. So that's, that's kind of a universal pattern.

[A]

I want to Just quickly run through these seven levels of safety because I think people don't realize this. Number one is primary income. Number two is backup income index funds in a taxable account, something like that. Number three is optional part time work. Number four is 401k plans. Number five is Social Security, like you mentioned. Number six is lifestyle flexibility. And I hear people that I know who are retired saying things like, oh, you know what, the stock market's down a little bit. Instead of not traveling at all or not doing anything at all, I'm just going to cut back a little bit. And then when we're having an up market again, I'll add those trips back in or I'll do the things back in. And work flexibility is the seventh level of safety. And I think that people aren't aware or aren't considering. You can always go back to work. And that doesn't mean it has to be a full time job. You can get some part time job or just earn a little bit of income to help smooth out the bumps when the market dips down.

[C]

Yeah, absolutely. And the only problem is a lot of people remain overly conservative, both when they're saving for retirement and when they've already early retired. And I think they limit their fun and work a little bit too long and cheap out on themselves a bit too much. And I know that Carl and Mindy have been dragged over the coals by our other friend in the personal finance world, Ramit, for being too cheap for their level of wealth too. You know Carl's famous for like booking multi hop flights when he could pay for a direct flight. Like slightly more. I would sell like my child before I took a multi hop flight within the US like it's just not even an option. So I'm like, huh, I thought I was cheap, but I guess the Jensens were outdoing me. You kind of have to train the frugality out of yourself because it's possible to go too far in that direction.

[A]

Okay, so this is kind of at odds with what we're talking about. And I hear people yelling at the radio saying this. We're saying be frugal and save your 50% or more. Save aggressively so you can get to retirement. But then once you get to retirement, loosen up the purse strings. How do you flip the switch?

[C]

Well, this is maybe a third, mmm, classic article. And I have one that I wrote one that's called, it's all about the sweet spot. Because you can be too cheap, you can be too spendy. The reason I wrote my early blog articles on this like fist punching type of mentality is. I was basing it on what I saw in average Americans who are, they really are too spendy. You know, like people, they'll have zero dollars, they'll have an unpaid credit card debt, and then they'll go out and sign up for a loan to buy like a $50,000 pickup truck when they don't even have $50,000. And in the fire world, we don't do that. You know, in the fire world, it's like, oh yeah, I have, I have a million dollars. Should I spring for like the $30,000 new car? No, I'm gonna buy like a $10,000 used one. Right. Like, it's so far on the frugal side of this sweet spot spectrum that I've realized that a lot of the readers and followers of our podcasts and blogs need the opposite kind of training. The regular American who's financing the pickup truck should not listen to that stuff because it's dangerous. It might make them go even more into the crazy tail end of overspending. Really what we should be going for is being relaxed about money, having a good time with it, but also still having a relatively high savings rate, 50% or above while you're working, hopefully. And then just always check in with yourself. Like if your wealth level increases, then make sure that all the frugality stuff you're doing is still in line with your values. And if, if you have more money, you might want to be splash out on some more stuff. Like one little example for me is I always take the toll lane. You know, like when I'm driving to Denver and you see the little sign that's like, you can skip all this traffic jam for $2.90 and you'll, it'll get you all the way to downtown. I'm like, here we go. Yeah. And that's like always the best 290 I ever spend. And I'm like passing hundreds of cars and I'm like, I can't believe you guys won't even spend three bucks to skip this incredible five mile long traffic jam. Little things like that you might not do if you're like, you know, on the bleeding edge of poverty, but you got to relax as your financial situation improves.

[B]

It seems like there's an efficiency element here that is maximizing your life in a general sense. And to do that, that was have as high a savings rate as reasonably possible while we're amassing wealth. And then it's within reasonable high constraints. How Do I optimize for, for something else that is not, not just more wealth at this point? It's, it's happiness or convenience or time spent doing the things you, you enjoy with the people you love.

[C]

That's so true. But I also wouldn't even say like, there's a line like accumulation versus retirement spending. Like you want to have a good time for your whole life. You might still be taking the toll lanes even while you're still saving for early retirement. Of course, like, you can, if you can afford it and your savings rate is still reasonable. Just don't go overboard cheaping out on yourself. And that's why I always try to focus on things that are a win win rather than a win lose. Like taking two flights instead of one to save money is a win lose, right? You win some money, you lose a bunch of time and your trip is less fun. Whereas living closer to work so that you can walk to work or bike to work is a win win because your days are better and you're spending a lot less on your car and commuting expenses and you're healthier. So there's usually so many win wins that you can do if you're at a beginner stage that you don't even have to get into the weeds of like, sacrificing stuff you like in order to save money. Not too much anyway.

[B]

And I think that's really important nuance for folks who are less familiar with all of the. I think I've read every single article of yours, by the way, over the years, except for this, the sweet spot one. I don't know how I missed this one. In those deep dives, there's folks who think, oh, it's just about being frugal. No, there's much more to it than that. But with that caveat, could you explain why controlling spending is the more important variable compared to income generation in your.

[C]

View, that is because what we've seen is that throughout our incredibly wealthy country, people seem to be able to manage to like, blow any amount of money. Like, no matter how high your income goes, people can blow it all and still end up in debt. And that's why we hear about the movie stars and the NFL players and the everyone else who's had multimillion dollar payouts that still end up bankrupt shortly afterwards, even though, like just one year of their income is more than enough to raise a family in upper middle class forever. You know, if they just invested that money. So it's, I mention that stuff because I want people to understand that having at least some concept to your spending is important. And also, if we're just thinking about the math of early retirement, the spending has more powerful effect because it accelerates your path to early retirement by making your savings rate higher. Right. Lower spending. And presumably you've learned the skills of how to have a happy life on this lower spending level so that after retirement you've locked in lower spending. So any amount that you've saved also goes further. So that's why I consider a double effect, because it lowers the amount you need to save and then it lowers the amount you need to spend for the rest of your life to be happy. So a smaller amount of investments gets you further. And very few people talk about lowering spending, at least before this whole fire movement started, because there's just such an implicit bias in the United States that more spending is always better, no matter what. It's like you always want more.

[B]

I also think that there's not really a profitable way to communicate the value of spending less from a mainstream media perspective. There's not a product you can sell. It's just don't spend money. There's a million ways to do that, tools out there like Monarch Money, for example, that are great, or mint.com or Excel spreadsheets. But I think. I think that that's another challenge is you can sell a course for five grand to help somebody make money. And if it helps them do that, maybe, maybe somebody gets value out of that, but there's nowhere to do that. And your view was, this is just common sense. I just want to share it with the world. And I think that was very refreshing and very powerful. And that's why it appeared so unique at the time. Maybe.

[C]

Yeah, because you could argue that in a commercial magazine or newspaper, they're depending on all these advertisers who are selling stuff. Like in a Wealth magazine, most of the ads are for luxury products, you know, like Mercedes and Rolex and all this stuff. So those advertisers are going to be a little pissed if the main message of the magazine is don't buy Mercedes and Rolex products because it wrecks your chance of an early retirement.

[A]

Pete, let's look at your specific situation. What was your savings rate, and at what age did you start your fire journey? How long did it take you to save up enough money that you felt like you could early retire?

[C]

Hmm. Deep, deep history. So I did try to write this down once, because what happened to me is I retired early and then enjoyed six years of retirement before I even started writing my first blog article. So it was already kind of stuff I'd done just passively. I was always kind of like interested in money and I would. I started reading investment books when I was a kid just because I found the whole subject interesting. So when I started earning like a professional salary, which was really just pretty average, it seemed like a ton of money to me, especially growing up in a family that wasn't super high income. So I just saved. I lived the life that I thought was very luxurious, which left a lot of money left over still because I was an engineer and I like to do things efficiently. And then after that money started building up and it's like tens of thousands and then hundreds of thousands. I'm like, well, what should you really do when you have too much money? There's gotta be some good use for this. And I already knew about investment. And so as I just kind of put two and two together and realized, well, investments are a form of passive income. So as soon as your investments cover your lifestyle, then you can quit your job. So that realization was probably in my early 20s and I'd already been saving up for a while. My fiance at the time and I were both like living this kind of lifestyle at that point we realized, okay, there's only going to be a few more years that we have to work before we are financially independent, independent. And we also wanted to start a family. So we thought it would be great to get all this done before the baby was born so that we could have the time to be full time parents. And those are all the pieces that went together. It really, the whole career took me about 10 years. Right. Because I started working around 20, finished working around 30, just before 31 actually. So you could just round it up to 31, I think. Is that all the questions?

[A]

What was your savings rate?

[C]

Oh, the savings rate, yeah. It varied depending on income. Right. So initially I started off making at the time like $44,000 was my first salary and that was Canadian dollars too. So my savings rate was lower. And I bought a car as well on my first year after graduation. So it's probably like 10% the first year. But it quickly went up and towards the end it was more like 60 plus percent because our salaries were up in the $100,000 range times two, you know, two workers. We were spending what we thought was a lot. It was like 40 plus thousand, which would be 80,000 in today's dollars. But that still left a lot to save. It kind of happens like this and at the end, as your salary goes up, your spending level is probably going down because you've already built out your household. You got all the furniture you need, you got your car, you have a paid off car, you've optimized all this stuff. You already got your bikes as a young adult. You know all the things you need to buy when you become an adult. So I find the spending kind of goes down, which makes it easy to save. And then of course, every time there's a life change, like having children, your spending is going to go back up, but, but then it goes back down again as you get through each stage. So 60%, maybe even as high as 65 or more. That combined with like I did a bunch of home renovations, so we kind of like did some forced equity in our first house and then rented it out in order to buy the second house. That all kind of like in big messy way added up to financial independence after about 10 years of work.

[A]

You said you bought a car after college. We used to ask guests what their biggest financial mistake was. And that was hands down the number one answer was, oh, I bought this brand new car after college. Scott, you also bought a brand new car after college. Was it a brand new car, Pete? Was it like a big. I, I can't imagine you ever in one of those $50,000 pickups which are $70,000 now, by the way.

[C]

No, I've never been a pickup duck guy, but I liked sports cars. So I bought a sport E car for, for Canada anyway. And it was only like two or three years old. I remember it was a 1994 Ford Probe GT. So it's kind of like this little sporty two door thing that was a clone, mechanical clone to the Mazda MX5 Miata, which is also a cool car. Not Miata MX6. It was fun. It was like more than I would have spent if I was Mr. Money Mustache at the time. But really what it did is it, it basically just consumed most of my first year of savings and it was worth it. Right? Like that's an example of a splurge that was worth it. So like it delayed, you know, it cost $15,000 at the time, so maybe like 30 of today's dollars thousand. But I had so much fun with it and my friends thought it was cool and you know, it's a good date car and everything. So I wouldn't take that decision back. It was worth it delaying my retirement by a very small amount.

[A]

Interesting. Okay, that was not the answer that I was expecting.

[C]

Yeah. And then I bought a $10,000 motorcycle right when I moved to the US because I'm like, I'm making so much money. I was brand new Honda, like sporty bike and that was like another $11,000, which is like 20,000 of today's dollars. That was maybe a bit of a worse decision. I probably wouldn't repeat that, but you know, like I still recovered from it. I sold it for like $5,000 a few years later with hardly any miles on it because I didn't really need a motorcycle, but it was still fun. You know, I don't, don't super regret it or anything.

[B]

Then you bought a 50 to 75 year retirement following that. Those didn't impact things too much.

[C]

You can afford to be very inefficient and still do pretty well. Like the key is being slightly less ridiculous than average. So like I did some ridiculous stuff, but not as much as my co workers who would buy like a $50,000 BMW and like a pickup truck with six wheels and like drive one each, you know, alternate driving them to work from a really, really far away like horse property. So like that kind of stuff is such bigger numbers that it really, that's what kind of sabotages your retirement is when you're, you're doing multiple years of salary, just getting burned up on, on all these little purchases and big purchases.

[A]

This is our final ad break, but we'll be right back after this.

[B]

Finances can be messy and confusing and.

[D]

It'S a lot of work for many of us just to get to the starting point in personal finance, which is understanding what you've got and where your money is going. That's why Virginia, my wife and I use Monarch Money as our personal financial command center for our bank accounts, our investment portfolio, and as our budgeting and spending tracker. Monarch automates everything. It's all linked and every transaction is automatically categorized into buckets of speed spending. In just a few minutes a month, I have a complete picture of where every dollar is being spent and I get a real time update of my net worth whenever I open the app. I could not be more thrilled to be partnering with Monarch Money, my favorite net worth tracker and spending Tracker here at BiggerPockets Money. I recommended them for years, ever since Mint.com shut down. Now, however, I'm excited to announce that BiggerPockets Money listeners get 50% off their first year with Monarch Money. Get control of your overall finances with Monarch Money, the app I personally use to manage my finances. Use the code [e-mail] in your browser for half off your first year. That's 50% off your first [e-mail] with.

[B]

The code pockets When I evaluate debt funds, I look for things like first position loans, personal guarantees, deep experience by the fund operator, low fund leverage, fast liquidity and consistent returns. These are some of the reasons why I'm excited to partner with Pine Financial Group. Their Fund 6 offers investors exposure to real estate credit, largely for construction and rehab, largely here in Colorado. With loans originated by an experienced originator. With over $1 billion in origination volume, 75% of their borrowers have been repeat customers over 17 years. They offer investors an 8% preferred return paid monthly and a 70 30G LP GP split of everything over 10% paid annually. The lockup period is nine months with liquidity available within 90 days. After that nine month commitment, the fund is open to accredited investors only. The fund's minimum investment is typically $100,000, but Pine Financial is able to reduce that minimum for some investors and have agreed to do so for BiggerPockets Money listeners to a minimum of $25,000. Full disclosure I am personally invested in this fund through my self directed ira and of course Pine Financial is sponsoring this message and our podcast. If you'd like to invest or check out their Prospectus, go to biggerpocketsmoney.com pine today. That's biggerpocketsmoney.com pine Please note that returns are not guaranteed and may vary based on fund performance.

[A]

Ever feel like managing your business finances is a full time job on top of your actual full time job? Well, you can find some of that lost time with Found. Found is a business banking platform that helps you effortlessly track expenses, manage invoices and prepare for taxes. You can even set aside money for different business goals and control spending with different virtual cards. I've saved so much money because Found helps me identify tax write offs and I've saved so much time that I can now devote to chasing new opportunities and doing the work that I enjoy. The best part about Found is that everything is in one place. No more juggling multiple apps or losing track of receipts. Found helps you stay organized and rest easy knowing everything is handled. Oh and by the way, other small businesses are loving Found too. This Found user said Found is going to save me so much headache. It makes everything so much easier. Expenses, income, profits, taxes, invoices even. And found has 30,000 5 star reviews just like this. Open a found account at found.com money found is a financial technology company, not a bank banking Services are provided by Piermont bank member fdic. Join thousands of small business owners who have streamlined their finances and with found Every once in a while you do something that makes you feel like a real grown up. Like making your own dentist appointment and then actually going that's grown up. What about setting up life insurance so your family's protected? That's like super grown up. Policygenius makes finding and buying life insurance simple. It's a marketplace that helps ensure your loved ones have a financial safety net in case something happens to you, whether that's covering routine expenses or investing the money for long term security. You can compare quotes from top insurers and find coverage that fits your needs and your budget. And get this with PolicyGenius you can find life insurance policies starting at just $276 a year for $1 million in coverage. That's an easy way to protect the people you love and feel good about the future. You'll get clear options, support from licensed agents who guide you step by step and no guesswork, just clarity, coverage and peace of mind. Secure your family's future with Policygenius. Head to Policygenius.com to compare free life insurance quotes from top companies and see how much you could save.

[E]

That's PolicyGenius.com traveling from the New York area, we wanted to visit a destination that was warm and we chose to stay at an Airbnb in Florida. While we were there, we went to the beach, played putt putt and ate tons of crab at local restaurants all within walking distance. We really had the best time and we really loved having our own private space. This trip got me wondering about hosting our own home with Airbnb the next time we're away. Maybe guests can enjoy our home while we're gone. Hosting may seem a little overwhelming, but it's really easier than ever. A co host can do the hosting for you. With the Co Host Network, you can hire a local co host to take care of your guests while you're away. They can help create your listing, manage reservations, message guests, and they can even provide on site support. Find a co [e-mail] host thanks for sticking with us.

[B]

I've got a couple tangential questions here. One is, and I'm going to lodge a complaint here. I know you say we can't take complaints, but this is a common one that we get is where are all the stories of the people who fire but only ever make $50,000 a year the whole way through? Adjusted for inflation, these folks are rare in the space. But you mentioned you started with $44,000 salary and ended at150,200. We've had so much trouble finding this person. We've heard from the community over and over again, we want to hear from this person and we just can't find them out there at a high level. My hypothesis is something to do with the fact that if you're going to pursue fire, you're going to get very good with money over a long period of time and that is going to naturally translate to boosts to the income over a decade or 15 year grind that typically it takes most people to achieve this goal. But have you found examples of that $50,000 earner the whole way through? And do you think it's pretty reasonable to expect people to be able to get there with the income that low?

[C]

Yeah. So it's kind of rare and it's possible that because our platforms are filtering for a certain type of person, you know, like people who seek out finance podcasts and websites, and they're like readers, they might tend to just be higher income people. But I did remember a couple like. So one person who I'm still in touch with, his name is Joe. And he and his wife at the time they were teachers in like the public school system in Las Vegas, which I think is notorious for having fairly low salaries for public school teachers. And Joe became the main guy who encouraged me to start a forum on my blog. So like this thing called forum.mrmoney mustache.com he was like the lead moderator. So I heard lots about him. He's a really, really smart guy. Both he and his partner are geniuses. So on top of being teachers, they also just started like save, save, save. They lived really frugally and then they would buy a rental house and then manage it really well and then leverage that to buy another rental house. And they were really good at, you know, managing the tenants. And eventually they built up a pretty big real estate income portfolio that was bigger than their teacher salary. So they're like, great, we're done. They ended up like that wealth level kept going up and up and up. And even after quitting the teaching jobs, they ended up in an upper income situation just because they were so good at all these other things. So it's a little bit like your story because they started out with lower incomes, probably like 35,000 each, and they had children. But they work their way up from that situation. And you know, that's one of the things about the United States is there is a lot of upward mobility. And if people are smart and work a lot, it's pretty hard to stay in a lower income. Unless you're really dedicated to just staying exactly in this thing that you're passionate about or if you're spreading your energy around, you know, like to do other things like raising a family, you're obviously going to be less devoted to your career. So anyway, the point is the math still works. You just have to spend less money. But the people are rare because America has a lot of money in it. And that's why I moved here, right. That's why I moved from Canada to the U.S. in my 20s is because I wanted the same upward mobility and my salary doubled as soon as I crossed the border. That happens a lot in this country and that's great.

[B]

The other place that I think people get stuck on a lot is with kids and planning for those expenses. And that did not seem to impact you and it seems to have no impact on and some a portion of the fire community. And it's just an enormous roadblock that's insurmountable for another portion of that. And have you observed that dichotomy as well with folks? And how would you respond to that?

[C]

Kids are interesting in the form of expenses because they can cost as much or as little as you want. Right? Like as a parent you get to choose short of medical emergencies or whatever. But in general, kids, like most parents, choose to spend more on their kids. And this goes up with each generation. And richer people have always spent more on their kids than less wealthy people. So I think it's more about do what you can afford and don't worry that it's going to wreck your kids lives if you live a frugal upbringing. Right? Because I grew up, my parents spent almost none on us. You know, there's. I have two sisters and a brother. So we're a big family and we didn't have any spare money so nobody did any expensive activities. We just like run around, play in the forest or go to school and then find something to do after school. There's no, we didn't do it like after school activities. And that was like great. You know, I had an amazing childhood. It was super fun. All kinds of like wild, you know, creativity stuff like making our own cars out of scrap parts and tree forts and everything else. And we didn't lack for anything despite the fact that there was no money. And then we had to pay for our own educations too, our own college educations because the parents didn't have the money to just fund everybody like happens in the rich families. So I don't think there's any shame in that for parents who don't have a ton of money. And so that should make it easier for everybody to get through the child raising years without as much pressure as we apply to ourselves. And now, you know, in my life now I know a lot of people who are in the child raising stage, living in very wealthy communities and sure enough, they spend a ton on their kids. You know, they might spend 40,000 per child per year on all the stuff between all the sports and private school tuition maybe, or just things that they buy their kids. And that's fine too. But it's totally up to you. It's not really, it doesn't have to be expensive. We have just the one child who is a grown up now. And I like to joke that he cost less than nothing because it was so intense to raise him that his mom and I weren't able to go off and do the normal stuff we would have done, like go out for dinner or go on vacations because child demands so much and you know, if the kid's crying all the time, you don't want to bring them on the plane and destroy everybody else's vacation. So you stay home and do stuff locally. So this actually saves money. It pays for his diapers.

[B]

I have one more area of expense that I think trips people up when they think about this math of the shocking simple math, early retirement. So we've discussed income, we've discussed expenses as the major component, we discussed their investment returns. But I think that the expenses, expenses, there are some expenses that people don't consider when they get to retirement or that trip people up, like child care, which is a cost for, you know, the costs of raising a child in general that we just discussed. Those are costs for a period of time that then go away, presumably when children become adults. Right. Or could get bigger if you decide you want to pay for an elite fancy private school, college education, for example. So there's things like that that trip people up. And then there's also insurance insurance, which I think is the last major bucket that is a challenge for people because that's often covered in part or in full by an employer while one is working. So could you basically share your kind of high level overview of how you view insurance as a general concept and how you think about things in your personal life as a financially independent multimillionaire and how one should kind of wrap their head around that when they're Approaching early retirement.

[C]

Yeah, I mean, to focus on health insurance specifically, because that's the thing that most people worry about in this country. It's not as expensive as most people assume. That's the one thing. Like if you've gone through your life with employer health insurance coverage, a lot of people don't even know how much the employer is paying for it. And so they assume, oh, I can't leave my job because I need this insurance, that you can't get any other way out. Well, guess what, your employer is paying this money. So obviously it must be a finite amount that they can afford, afford to cover. And you can buy that insurance for at least as cheap as your employer. As it turns out, like when you, when you look on the marketplace nowadays, what is it called? The Affordable Care act has made insurance a bit easier and more transparent to buy. So it's, it's in the hundreds of dollars per month, not in the thousands of dollars per month, you know, on a per person basis. So it's not as bad as what people assume. And part of the reason they get confused is because when you quit a job, you get this option to continue your health insurance through the program called cobra. But the COBRA insurance is always like some ridiculous, like multiplied to infinity. It's not what your, your employer was paying, but they charge you more maybe just because you're scared or they think you're desperate or whatever. That's not the real price of personal health insurance. And then on top of that I have, there's other alternatives. Like I use a direct primary care physician subscription, which is like in my opinion, much higher quality healthcare, but it's only 100 and something dollars a month. So which is basically like a doctor subscription. And then I have a separate thing that I don't really need that's just like a catastrophic health care program, you know, where if I have more than a $5,000 expense, they'll reimburse the rest of it in any given year. But the wealthier you get, the more this doesn't even matter because you can self insure. Like if you think about, you know, Warren Buffett, he doesn't need a health insurance company to come in and pay his bills. If he has medical bills, he may or may not have health insurance, but he doesn't need it. So the higher your wealth gets, the less insurance matters. And like, that's one of the reasons I don't keep insurance on my, my house, my primary house. And that's just because it's, it's not a Very expensive building and I could afford to re build it if it burned down. And I would as a house builder, recreationally, I would make it cooler than it is right now. So that would actually be kind of fun. But don't come burn down my house. That's not an invitation. But so like whereas if I was just starting out in my 20s and I had a huge mortgage on this house, I absolutely couldn't afford to replace my house out of cash. And also the mortgage company insists on you carrying insurance. So insurance isn't a big factor, you know, like it's, it's more like helping you sleep at night, but it shouldn't be a giant part of your spending.

[B]

First great point on the mortgage component, right. I am now starting to have a couple of properties without mortgages and you can boost the deductible very high on. So I would not feel comfortable replacing some of my properties ground up. So I carry insurance, but I'm fine with a 20 or $30,000 deductible which sends a very clear message to the insurer, hey, I'm only going to be calling you if the place burns to the ground because I'm not Mr. Money Mustache and will not find it fun to rebuild the property on my own in this particular case. So that makes it much cheaper, Much, much cheaper. Like thousands of dollars a year in premium cheaper. And then I also was a little surprised at the difference in rates for families on the private marketplace. Even if you have a high income, they're significantly cheaper. But a big component of that is you just take it for granted, I think Pete, that you're going to use a high deductible plan, which I think almost everybody who pursues fire should be doing in that sense. Because if you have millions of dollars you can sell insure up to 20 or $30,000 in a given year and that will make a huge difference in you or your family's overall premiums that you pay for health insurance. And then last, I'll also say that as you think about this in a self employment world or begin amassing significant assets, there's a whole bunch of alternative solutions that are coming up. Like the direct primary care which you mentioned, which I also have for both of my kiddos and it's fairly cheap. It's like 130 bucks a month I think for both kids, an infant and a two and a half year old. And it's great the doctor responds anytime, day or night. I never have to go to urgent care. You know, in the case of A serious emergency. We of course have to go to the emergency room. But otherwise we're able to get all these prescriptions filled and all those types of things and set appointments pretty quickly. It's much better way of doing medical care than I've ever experienced.

[C]

And there's no copay. So you have like a little thing where you need a prescription, let's say for strep throat. You just text them, they're like, oh yeah, or maybe a video call in the worst case. You go in and then they're like, here's your prescription. And then the whole thing's done. There's no bill for that. Whereas even with the health insurance you typically go to the Kaiser office and you're waiting and everybody else is sick around you and then you feel like you're in this third world situation. And then you get a bill for like $200 until you reach your out of pay max, whatever deductible thing. So the whole thing feels terrible in the old system and great with direct primary care.

[B]

And it's like cable TV package price. Right. Like I'd way rather have that than cable. Table T and that pairs really nicely as well with these health share plans. I haven't made that leap yet, but I know many, many people in the early retirement community are making that leap.

[C]

Yeah, and I have an article on that too. Just to plug it a little bit. I wrote this article called two Years without health Insurance and what I do now and then that's how I landed on this idea of using the health share program which is by, you know, the researcher on that was our, our co owner of headquarters. His name is Bill. He got us all, or at least me interested in this program called Sidera, which is one of the health sharing companies. He convinced me to sign up. I've been a happy subscriber ever since. And it just helps like not have to think about what if something happened. Even though I've never really had a health cost since I moved to the U.S. it's still just nice to know that you have the coverage in case.

[B]

You know, the article around shockingly simple math really presumes a stock market, you know, pretty linear return because that's how you have to have to model these things. And that's I think led. There's been a lot of confusion in the early retirement space about how to factor in other types of assets like real estate. And I'll throw in crypto, for example. How do you think about those? And it's a concept of an early Retirement portfolio. Let's start with real estate, maybe your framework on that, because it's probably a little easier than something like a crypto investment.

[C]

Yeah, that's for sure. So real estate supposed to be pretty passive income source if you're doing it well, but it still has numbers that you can attach to it. Like you'll have an amount of money that's tied up, you know, the capital, the amount you own of a property. And then you're going to have its net cash flow after all your expenses. And that's the part that you get to use towards your early retirement. So at the very most simple level, if someone is retiring off rental properties, you could just say like, if the cash flow that's free and clear from these properties is enough to pay for all your bills, then you're retired. And then that's kind of nice because you know that your rental properties are probably going to go up with inflation automatically over the years. It's going to be lumpy, but it'll still go up. Sometimes you get lucky and like in the Denver market, it'll go up much faster than inflation and your rents will rise faster than inflation. So you'll get a positive surprise. But if you're just modeling it, I would suggest to take the conservative route, which is you figure out the cash flow only and then remember that if you have mortgages on these rental properties, those are going to get paid off eventually as well. So every time you have a rental property that has a principal plus interest portion in its loan statement, that principle is savings. Like you're actually saving every month. A lot of people miss this detail. So $1,000 mortgage payment might have like $271 going to principal. The other $800 is interest going straight to the bank. And then they, they put that whole thing as a cost and it's not a cost, they're actually saving. And then the interest is a cost and eventually that goes away. And then you're going to get like that property is going to be free and clear and suddenly you're going to get a huge cash flow bump. So I would consider that as like additional saving that you're doing. You can do like a cash out refi if you need to get access to that money. I think the big picture is that real estate should be outperforming the stock market if you're doing a good job at it, if you have the right properties, because it's a job, right? Like if it's not outperforming the stock market, then you shouldn't have real estate because why not just have this totally passive investment. So I always encourage people like including people I've been coaching recently to look at each of the rental properties. Don't keep it just because you have it. Make sure it is a valid rental property. Like make sure you don't have like a million dollar house that's only giving you $2,000 of rent. Because you get way more in passive stock market income if you just sold that and bought the. Bought the index funds. But in general I don't. Is that how you would you agree with that? Is mostly basing it on cash flow but remembering that the cash flow is going to gradually increase.

[B]

I struggle with it because I think that that's the most conservative way to think about it.

[A]

Right.

[B]

Is is this is an inflation adjusted stream of income. You know, if you buy a $500,000 house that generates $30,000 a year in net operating income, that should be a reasonable baseline target for a paid off rental property. Hopefully some folks can do better than that. That should just produce that amount of income, give or take, perpetually. And the advantage to that is that it's a much higher cash flow stream. Potentially if you're in a higher income tax bracket, more tax advantaged the way you could harvest that money from a more traditional stock bond port portfolio. But then there will also be work and some lumpiness to those cash flows, of course. And you can't sell it off in chunks the same way you can from a stock bond portfolio. And then the leverage component should amplify those returns. Yes, in the accumulation phase. So I completely agree. I think it's challenging for folks to wrap that around in their heads, especially when they're in between those two states. The high leverage, high return phase and the paid off cash flowing phase when it will underperform the stock market over a long period of time, but also produce that very predictable cash flow stream.

[C]

It helps if you just do a net worth calculation where you add up the value of all the rental properties and then subtract the mortgages, any debt that you have on them. So then you really understand how much assets you have working for you and then you compare that to the cash flow and decide whether to keep them first of all. And secondly you can do a future forecast and say well, what is going to be like when these are all paid off, whenever that might be. And then that's going to be your terminal, your final cash flow if you let them all have no mortgages. And that's what your Your long term budget is going to be between those two. Like if you're smart enough with money to accumulate these properties, I'm sure you can do the analysis and determine what your retirement budget can be.

[B]

I think the challenge is in that middle piece because that's, there's a 30 year window where most people are in that middle section. And in that middle section, if the cash flow is tight, you can't really count on it the same way that you can or on one that's paid off or that has a very large spread between the gross rent and the mortgage payments. And I think that we find a lot of people who invest in real estate have this in practice a problem translating that theory to how much can I actually spend from this portfolio right now? And the answer is almost always what you just said. Make a list of all your properties, determine which ones are winners, which ones are losers, sell the losers and keep the winners. And that's very challenging in practice for a lot of folks for whatever reason. Okay, last question here. Let's talk about out other assets that are a little harder, right? They don't generate cash flow, they're not stocks. Like and let's use Bitcoin. You and I share, I think, a similar viewpoint on bitcoin. I had a video come out last year, looks like it was pretty poorly timed, called the Rational Investors case against Bitcoin. The comments have not been kind from the bitcoin community. They have strong opinions there. And then you have an even better titled article which is more frank why Bitcoin is stupid for from seven or eight years ago. But how does one think about this asset that has gone up in value a tremendous amount over the years and incorporating it into one of these retirement portfolios?

[C]

Yeah, well, I would think people should sell it and buy real investment because Bitcoin is like a dice roll that has just been continuing to come up on sixes over and over and over again. And people are like, see, I'm a genius investor. And other people believe that it's going to keep happening. Like Bitcoin is entirely dependent on belief. Like there's no actual fundamentals, it doesn't generate any, any income. And that's why it's by definition, not just my opinion, but that's why by definition it's a speculation rather than an investment. An investment is something that generates income over time and it would be worth it, owning it for your whole life if you were never allowed to sell it. And imagine if somebody said well bitcoin is great, but the the price doesn't actually matter because you're never allowed to send, sell it and it will never give you dividends. Would people actually want to buy owned Bitcoin in that situation? Well, no, of course not, because it's, it's guaranteed by definition that it'll never give you anything. However, Bitcoin has value only because you're hopefully that someone else will buy it from you for more in the future, or some people dream that it'll replace the US dollar or whatever. Like, either way, you're hoping you can buy stuff with the Bitcoin. So that's not an investment and you can keep speculating on it and that's fine. And if it goes up more, good for you. But I certainly wouldn't bet any percentage, any significant percentage of my future wealth on this very, you know, moment of human hype. I'd rather own something that generates ongoing income, like a rental house or a business, which is what stocks are. So that's up to you.

[A]

Well, you don't invest in Japanese yen, you don't invest in Euro. Why would you call it investing in Bitcoin?

[C]

Yeah, well, the reason people think it's investment is because it has been going up recently during its very short lifespan. And that's how bubbles work, right? People get excited, they get fomo and then they fill in the backstory of why this is different, why it's not a speculative bubble, like, oh, well, the Federal Reserve is corrupt, it's fiat. Money is all toilet paper. We need to have independent this and that. And the reasons keep shifting because the story has to keep existing, otherwise the whole thing doesn't have any value. It's dependent upon a story and a belief system. System. And I just don't play those games, right? Like, I've never been part of any religion or belief system or like worshiping leaders just because they're famous. So that's how I feel about Bitcoin too. And if other people want to have a different opinion, that's great. It's funny because the criticisms I get from my article, they're all based on people who didn't read it, like 100%. They're like, how do you feel now? Bitcoin's $117,000. Like, whereas right in the article it says, this article is not about the price, it's just about the idea of speculating on anything based on future price improvements. Like, that's not an investment. And no one reads that if bitcoin goes to $4,000,000,000. My article is exactly as valid as it was if bitcoin had gone down to $0.01. Because it's not about the price of bitcoin. It's about the meaning of speculating on things.

[B]

It looks like the three of us will not be making our bloodlines. As one bitcoiner put it to me, with this speculation here, I completely agree. Bloodline, you're missing out an investment that could make your bloodline actual quote from, I presume bitcoin, bro, in response to some argument I made against it at one point.

[C]

So is that talking about having a bunch, you know, building a dynasty and then you give money to your children so that they are rich in the future?

[B]

I think if you just hold bitcoin forever and never sell it, it just perpetually compounds in value going up ad infinitum and then you're their heirs and descendants are rich until the end of time.

[A]

No, the first generation makes it, the second generation preserves it and the third generation spends it.

[C]

That's true. And that's the other funny part is like they're criticizing this approach that we have. Even though I'm like, well, I've lived most of my life in financial abundance and been retired since I'm 30 and I'm almost 51 now, so I can't be doing anything all that wrong. How much more do I want? How much better money situation do I want? So I don't need bitcoin.

[B]

Well, thank you so much for coming on here today, Pete. It's always just a privilege to chat with you. It's been great to see you a couple times recently. Thank you so much. And yeah, I hope you continue enjoying your retirement here and you know what's on the docket for the rest of the day.

[C]

It's an even bigger privilege to be on VP Money. So thanks a lot for the invitation. And the rest of my day, it's just a dad day for me, so I'm going out for a hike with my son and I'm doing some construction for the rest of the day and it's going to be awesome. Happy Tuesday.

[B]

Happy Tuesday.

[C]

I had to check.

[A]

Love that you had to check. Like your watches. Just Monday, Tuesday, Wednesday.

[C]

It doesn't even have hours and minutes. It just does the day of the week.

[A]

I've seen clocks like that. That would be a great wristwatch. Okay, Pete, before we go, where can people find you online?

[C]

If you just look for Mr. Money Mustache, you'll find all the different versions of me. My favorite place is people reading the blog or joining the Bootcamp, but I also have a mostly an active Instagram account and Facebook and X Twitter, whatever.

[A]

Awesome. Okay, Pete, thank you so much for your time today and we will talk to you soon.

[C]

All right, you too.

[A]

All right, that was Pete, Mr. Money Mustache and Scott. I always have a great time talking to him. What did you think of his commentary?

[B]

It is just always a privilege to chat with Pete. He, he really pioneered a lot of stuff in the world that we live in in the fire community here. And he's only continued to expand those concepts even as he has enjoyed a decades long early retirement during that time period. So it's just truly a privilege to chat with him and love the refinements and the evolutions, but the lack of deviation almost in its entirety from the core principles that he's stuck to his entire life.

[A]

Yeah, you said he pioneered a few things. I think he pioneered a lot of things. He was one of the first financial bloggers talking about how you can reduce your spending to retire early and live the life that you want. He was certainly the person that we found first. And when we talk to people, it's almost always, oh, I found this One article from Mr. Money Mustache.

[B]

It's funny because we were mentioning his first car purchase which I didn't know before that was. That was kind of fun to hear about. His blog obviously influenced my first car purchase and you would not believe the amount of time I agonized over whether I should buy a then brand new 2014 Toyota Corolla or if I should buy a 2006 or 20077 or 8 year old Toyota Corolla. Because of his blog and the wastefulness component of that. It seems like such a silly thing to agonize over 10, 15 years later. But that was where I was thinking. I never had the cool car. Sort of have one now with my test Tesla here. But it was funny for me to hear that.

[A]

I was actually surprised that he had purchased a fairly new car right out of college. I thought for sure he would have been very frugal his whole life. So that was a fun little tidbit that I had never heard before. All right, Scott, this was a super long episode, so we should get out of here. Are you ready?

[B]

Let's do it.

[A]

That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen. Saying farewell gazelle.

[B]

That's the sound of the fully electric Audi Q6E Tron and the quiet confidence of all ultra smooth handling. The elevated interior reminds you this is more than an ev. This is electric, performance redefined.