BiggerPockets Real Estate Podcast Summary
Episode: Late Start, Early Retirement: A Step-by-Step Fast Track to FI
Release Date: December 30, 2024
Introduction and Episode Overview
The BiggerPockets Real Estate Podcast concludes its 2024 season by republishing a standout episode from the Money Podcast. Hosted by Mindy Jensen and Scott Trench, this episode features Bill Yount and Jackie Cummings Koski from the Catching up to Fi podcast. The discussion centers on achieving financial independence (FI) and early retirement, particularly catering to individuals who recognize they’ve started their financial journey later in life.
Understanding the Late Starter Phenomenon
The conversation kicks off by addressing a significant statistic: the average Gen Xer has approximately $40,000 saved for retirement, highlighting that many are embarking on their FI journey in their 40s, 50s, or older. Jackie Cummings Koski emphasizes that various life events—immigration, divorce, parenting—can contribute to a delayed start in financial planning.
Jackie Cummings Koski [03:43]:
"I just woke up at 38, and some people might not consider that late, but I knew I was way behind. When you're finally waking up because you didn't get this stuff early on, that gives us a late start."
Steps to Financial Independence for Late Starters
Step 1A: Wake Up and Acknowledge
Jackie and Bill discuss the importance of recognizing the need for change. This "wake-up call" often comes from personal realizations about financial inadequacies.
Bill Yount [07:50]:
"Getting started is really the hardest part. And as Jackie says, once you dive in, it's amazing how fast you can turn your mindset around and turn your money around."
Step 1B: Give Yourself Some Grace
Acknowledging past shortcomings without self-blame is crucial. Mindy Jensen underscores that financial independence is attainable regardless of when one starts.
Mindy Jensen [06:57]:
"The average American is a late starter. So when you see so many comments over and over again, you start thinking, oh, maybe something's wrong with me because I'm 50 and I'm not retired."
Step 2: Diagnose Your Starting Point
Understanding where you stand financially is essential. This involves creating a comprehensive budget and assessing net worth.
Jackie Cummings Koski [12:39]:
"You have to know where you're starting. Like, how can you even decide, okay, should I start kicking up my investing first? Should I pay off my debt first?"
Bill recommends tools to simplify this process, making financial tracking less daunting.
Bill Yount [16:04]:
"I use Monarch Money, and I use Empower. These apps make it easier to track your net worth and expenses without the manual hassle."
Effective Budgeting Techniques
Backward Budgeting
Jackie introduces the concept of backward budgeting, which starts with savings and investments, then allocates expenses based on what's left. This method reduces the likelihood of overlooking essential expenses.
Jackie Cummings Koski [16:29]:
"The backward budget works by taking everything that you're saving and investing, and then what’s left is your expenses. It reduces the chance of forgetting something important."
Utilizing Financial Tools
Bill endorses using apps like Monarch Money and Empower to streamline expense tracking and net worth management, making the budgeting process more manageable and less time-consuming.
Bill Yount [18:21]:
"With Monarch and Empower, you get detailed reports that help you plug the holes in your budget and maximize your savings."
Planning and Vision Statements
Creating an Investor Policy Statement
Bill advises developing an investor policy statement to map out financial goals, which includes:
- Current net worth and nest egg
- Specific financial targets (e.g., income goals, retirement dates)
- Savings and investment strategies
- Insurance and estate planning
Bill Yount [26:38]:
"You've got to think about your entire financial life—insurance, estate plans, and specific financial goals. Without a map, you won't reach your destination."
Setting Personal and Financial Goals
Mindy and Eric Knudson highlight the importance of dream statements and vision documents to outline both tangible and intangible goals, ensuring they align with one's desired lifestyle post-retirement.
Eric Knudson [30:04]:
"We write out what our life looks like at the end of 2025 and 2028. It helps us stay focused and adjust our plans as needed."
Overcoming Psychological Barriers
Cultivating Curiosity and Learning from Mistakes
Jackie shares her personal journey, emphasizing curiosity as a driving force to overcome financial fears and improve financial literacy. She recounts her experience with real estate investment, learning valuable lessons from initial mistakes.
Jackie Cummings Koski [34:51]:
"I became so curious about the stock market and investing. My fear of returning to poverty pushed me to educate myself and make informed financial decisions."
Emotional Resilience and Support Systems
Mindy and Jackie discuss the significance of emotional resilience and the support from communities like BiggerPockets, which provide motivation and camaraderie for late starters.
Mindy Jensen [33:38]:
"Women are increasingly taking control of their finances, especially post-divorce, and communities like BiggerPockets support them in embracing their financial journeys."
Practical Steps and Tools
Budgeting Apps and Techniques
The panel recommends various tools and techniques to simplify financial tracking, such as:
- Monarch Money and Empower for automated tracking
- Spreadsheets or even pen and paper for personalized tracking
- Backward budgeting to prioritize savings and investments
Jackie Cummings Koski [19:48]:
"No matter how you track your expenses, having them in place helps you identify areas for adjustments without making you miserable."
Adjustments Over Cuts
Instead of drastic spending cuts, Jackie advises making subtle adjustments to spending habits, ensuring long-term sustainability without sacrificing happiness.
Jackie Cummings Koski [19:31]:
"Make tweaks here and there rather than cutting things out completely. Don't do things that make you miserable because you won't stick with them."
Conclusion and Next Steps
The episode concludes by outlining the initial four steps for late starters on their financial independence journey:
- Wake Up (1A): Recognize the need for financial change.
- Give Yourself Some Grace (1B): Acknowledge past shortcomings without self-blame.
- Diagnose Your Starting Point (Step 2): Create a comprehensive budget and assess net worth.
- Dream and Reflect (Step 3): Develop a vision and set specific financial goals.
Bill Yount and Jackie Cummings Koski promise to delve deeper into strategic financial planning in the upcoming episode, providing actionable tactics to help listeners achieve their FI goals.
Bill Yount [25:35]:
"First we pause and plan. After planning, we take action. Creating an investor policy statement is crucial for mapping out your financial journey."
Mindy Jensen [31:50]:
"Listening to Jackie and Bill has been invaluable. Their strategies are practical and tailored for those of us starting later."
Key Takeaways
- Late Starters: Understand that starting later is common and entirely manageable with the right strategies.
- Self-Compassion: Grant yourself grace for past financial missteps to foster a positive mindset.
- Comprehensive Budgeting: Utilize backward budgeting and financial tools to gain clarity on your financial status.
- Goal Setting: Develop a clear vision and specific financial goals to guide your journey toward FI.
- Continuous Learning: Embrace curiosity and learn from past financial mistakes to make informed decisions.
- Community Support: Leverage communities like BiggerPockets for motivation and shared experiences.
By following these structured steps and utilizing the recommended tools, even those who feel they've started their financial journey late can effectively work towards achieving financial independence and early retirement.