← ChooseFI | Financial Independence Podcast
ChooseFI | Financial Independence Podcast
Zero-Based Everything: FI, Travel, and the Art of Starting Fresh | Katie & Alan Donegan | Ep 559
01:20:16
Join Brad, Katie, and Alan in a candid conversation about financial independence, travel rewards, and lifestyle choices. They discuss the importance of zero-based thinking, share experiences as digital nomads, and challenge conventional views on net...
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- [00:00]
Brad
Hello and welcome to Choose a Fi. Today on the show we have our good friends Katie and Alan Donegan. And we're just going to do a fly on the wall conversation amongst friends. We're going to let you in on this conversation that we'd be having anyway. The three of us are great friends. We've traveled the world together and we have these fun, far ranging conversations and we usually talk about life and Fi and everything in between. What we're up to, how we change our minds, what we're reading, what we're watching, what we're playing. I don't know, maybe commiserating on some things that have come up in the world that we're not so thrilled with, et cetera. But at the end of the day, it's about just thinking and talking and looking at the world and trying to have fun and explore. And I think that's what Alan and Katie do best. And yeah, we talk about travel, which they've been doing as digital nomads for five and a half years now. We talk about zero based thinking, which is an interesting concept they've come up with that I love. Little bit about Robin Hood and Tesla and selling shares and how difficult or not difficult that may be. A little bit about dividend investing and then just a lot of fun of what we're up to in our own lives. I think you're really going to enjoy this. And with that, welcome to Choose Fi. Katie and Alan Donegan, welcome back to the podcast.
- [01:18]
Alan Donegan
Hello.
- [01:18]
Katie Donegan
We are back.
- [01:20]
Brad
We are back. Yeah. So this is going to be fun. We envision this episode, basically. We talk all the time. We're great friends. We spent a whole bunch of time in Asia together last year. We spent a good portion of time in April in London celebrating you and your incredible British Empire medal, which was the coolest thing ever. I'm still unbelievably blown away and honored that you invited me to go to the Tower of London for the ceremony. It was like literally, the phrase once in a lifetime experience is almost always a complete fabrication. Like they're very rarely. And that was truly once in a lifetime. So congratulations again to both of you.
- [01:57]
Katie Donegan
Thank you. We were so honored to have you there and I couldn't have thought of anyone else we'd rather have there. And you were just so happy soaking up the atmosphere and enjoying it. And I think that added to our happiness to see your curiosity and what was going on. And then we went to the Coats of Arms place with the crazy Chester Herald of Arms and that was the Most British experience I think I've ever had in my life.
- [02:23]
Brad
Yeah, that was really something. Yeah. It was at the College of Arms. Right. Was the place. And I just couldn't believe this guy was bombing through these books that were 500 years old. Like, oh, here is William Shakespeare's dad's crest and coat of arms and here's the little spear on it. And it was, it was just, it was absolutely wild.
- [02:41]
Alan Donegan
He didn't even have white gloves on or anything or tweezers to turn the pages. He was just ruffling through them. He almost like licked his finger to get the friction to turn the page, didn't he? I was like, what are you doing?
- [02:51]
Brad
Yeah, that was, that was absolutely crazy. Absolutely crazy. So again, a huge congrats to you guys. That was for, I believe, something on the order of financial services to his Majesty's subjects and just basically providing just this incredible resource that is right. Rebel Finance School. And you've helped tens upon tens upon tens of thousands of people and certainly probably in the hundreds of thousands all told, but I know tens of thousands each year and it's just a remarkable thing. So thank you both.
- [03:20]
Katie Donegan
It's our pleasure. It's like our gift to the world and we feel very proud of just giving it away each year.
- [03:27]
Brad
I love it. So why we're doing this episode today for everybody listening, Alan, Katie and I talk all the time, we hang out all the time. We have really interesting, random, far flung conversations and we just decided, hey, let's do an episode where it's just a fly on the wall and we have a Google Doc where we have 16 to 20 different items. Who knows how many we'll get to today? I suspect we'll get bogged down in the very best way possible on some of these things and just talk and talk and talk. But why don't we start with something that you guys presented on at the economy conference? So in March in Cincinnati, you did a presentation basically on your travels and all the things you've learned. Of course we're not going to do a two hour presentation here, but you also introduced a concept to me that I'd never heard of, which is zero based thinking, which is basically like looking at the sunk cost fallacy and trying to eliminate it as much as possible. So we've got a lot in there. But let's just start with you two have been. I don't know if you like the phrase digital nomads, but in the old days people thought of as digital nomads for five plus Years now. What is that like? Is it. Is this the fi. Life that you envisioned? Is it. How has it lived up to it? How has it not been as great? Like, where have you moved? Where have you changed? All. All these things? And again, that's a lot to ask seven different questions all at once. But let's start there.
- [04:48]
Alan Donegan
So to answer your question, what do we think of the term digital nomad? We prefer to use the term homeless and unemployed.
- [04:56]
Brad
Nice.
- [04:56]
Alan Donegan
And we've been doing that since the beginning of 2020, which was not the best time, in hindsight, to start traveling the world extensively. But we've. Yeah, we've been nomadic for five and a half years now.
- [05:08]
Katie Donegan
And what's it been like? It's been a roller coaster, ups and downs. Traveling to different places, seeing new places, meeting incredible people, sunsets on the beach, and then being hungry and lost and wondering, how do I order food in this foreign language? And I don't know how to cope with life.
- [05:29]
Alan Donegan
I think Brad can relate to that.
- [05:31]
Brad
Right?
- [05:31]
Alan Donegan
What happened to you in Singapore, Brad?
- [05:33]
Brad
Oh, goodness. Yeah, this. This was. This was bad. And it happened to all three of us. Let's be clear. But. But to me, more than. More than the rest of you, too. But I think this is actually a really good lesson on just, like, the basic needs of humanity sometimes, right? Which is, hey, we had just traveled. We'd spent this, like, exhilarating week in Bali at the Five Freedom Retreat. We flew to Singapore. We spent an amazing day. Amazing. At Universal Studios in Singapore. But it was 90 degrees, but it was really sunny. We were hot, we were dehydrated, we were hungry, we were tired, all of these things. And we tried to just go about business, right? And. And you don't realize, like, oh, wow, sometimes when I'm in a bad mood or sometimes when it seems like the worst world is crashing down around me, which was my ridiculous quote to the two of you.
- [06:28]
Alan Donegan
You actually said, isn't that I feel.
- [06:29]
Katie Donegan
Like the world is crashing down around me. And it does feel like that at the time.
- [06:34]
Brad
It does. And then you get a big old plate of rice and chicken and pork and all sorts of other assorted Singaporean food, and voila. We felt a whole heck of a lot better. We each had probably 30 ounces of cold water and this big heaping plate of food, and all of a sudden, the world wasn't crashing down around us anymore. And that's. It is really, really interesting. Like, we think about, like, our brains as these kind of like, okay, our brain's just Going along, doing its thing. But then you realize, like, oh, I didn't get a good night's sleep last night. Maybe that's why I'm a little more anxious today. Or maybe I'm having those ruminative thoughts, right? Or like, oh, maybe I just spent four hours out in the 90 degree sun and I'm just dehydrated and the world isn't crashing down around me. I just need some water.
- [07:22]
Alan Donegan
Yeah, it's hard to forget to cover those basic needs sometimes, isn't it? Because we all get so caught up in what we're doing, whether that's having fun, doing some work, whatever it is. Like when I get into a spreadsheet and some data and some graphs, 4, 5, 6 hours go by and then I wonder why I can't see straight and start having a headache.
- [07:39]
Katie Donegan
Well, I think we vastly, as humans, we vastly underestimate the effect this stuff happens on us. We think we can still operate when we're tired, we think we can still operate when we're hungry and we just, we don't operate very well at all. And it's really interesting having like, we've got 22,000 people on the rebel finance school this year alone doing the course with us live and people who are struggling. It's amazing how we end up getting emails at 4am and you start to find out, oh, they're not sleeping well as well. Oh, these, the people who email us and are really in a pickle and it's sleep and it's food and they can't like, no wonder you can't make a decision when we were melting down in Singapore and not able to cope, like we couldn't even make a decision of which food to buy.
- [08:27]
Alan Donegan
There's that added layer as well that you're in a foreign country, you don't quite understand how it works to order, you don't quite understand who even to ask and you feel awkward because you can't communicate and it all becomes too much, doesn't it? And we've had that happen many times.
- [08:43]
Katie Donegan
Which sounds a lot like trying to organize your investments, which feels like reading an entire different language. So if you're not well fed, well watered and well rested, organizing your investments is going to seem like the world is crashing down.
- [08:56]
Brad
Oh, I like what you did there, Alan. I like what you did. But the good thing, right, about your investments is like for a lot of us who follow the simple path to wealth is I don't have to organize my investments. That's what's so Great about it, Right. For me, the vast majority of my money is invested in vti and I sleep very comfortably with that. And I, I do, in fairness, I do have a bit more money in Berkshire Hathaway, the individual stock, the Warren Buffett's company, than I actually even realized, which is kind of weird, but I guess that maybe speaks to organizing your assets. But yeah, the vast, vast, vast majority of my wealth is in vti, which just makes it simple.
- [09:33]
Katie Donegan
Yeah, we were speaking to a value stock picker the other day. You know the people who say, like, I buy stocks that are value and I can't buy VTI because it's overvalued at the moment and all the rest of it. And the stock they had picked, to be fair, was Berkshire Hathaway. So they'd invested all their money in that one stock. And it made me think, well, if I was forced, like if you put a gun to my head and said, alan, you have to pick a stock, it would be that one. Because basically by buying that one stock, you're buying hundreds and hundreds of profitable companies underneath it because that's what they own. So it's kind of like a mini index fund in one stock, but chosen by Buffett. But it is quite interesting. But just to be super transparent about what we do, we have pretty much all of our money in one simple global index fund.
- [10:25]
Brad
Gotcha, gotcha, gotcha. And so I know investing is different. I see you guys are UK citizens. Are you able to do that through Vanguard or another type of brokerage that we would recognize?
- [10:37]
Katie Donegan
We have Vanguard in the UK and you can now get our versions of a 401k and a Roth and Ira through Vanguard. So you can go direct to them. You can pick a Vanguard fund. They have actually like the UK version of vti, which is actually vti. Like actually it's UK version has all the American stocks in it, or you can have the total world version where you're not picking countries. So for us, it felt a bit weird to invest all of our money in America, considering we're not American. And so we just picked the global one, which splits your money equally in the size they are in the economy across the 50 plus investable countries you can buy.
- [11:17]
Brad
Gotcha. Okay, so you guys are homeless and unemployed slash digital nomads and have been that way for five and a half years now. So what does travel look like today? Because I think there are obviously a lot of different travel styles. Right? Like you could do the more fast paced travel where you're staying Somewhere for days or maybe a week or two, consistently moving. Or you could do slower travel where it's maybe a couple months at minimum in a spot, maybe have recurring spots that you go back to each year. How do you think through, like, balancing new places with some continuity, with some community, with all of these things that are. That are important but aren't altogether obvious what the right answer is?
- [12:00]
Alan Donegan
Yeah, there is no right answer because we. I feel like we keep getting it wrong. Or we. We kind of veered too far the one way, which makes us swing back the other way. So too much fast travel, which then flings us the other way and be like, we just crave stability if we move around too much.
- [12:17]
Katie Donegan
And the word travel. I don't like the travel element of travel. I like the being in the place element of travel. Apart from we did actually fly business class for the first time the other day, and that was amazing.
- [12:32]
Alan Donegan
I didn't want to get off the plane.
- [12:34]
Katie Donegan
Can we have one of these chairs for home?
- [12:36]
Alan Donegan
Can I just stay here? It was amazing.
- [12:38]
Katie Donegan
But in general, we just like to be. So at the moment, we've got three months solid staying on the beach in Brazil. That's it. One location, one place. And I think to start with, we were very excited about moving and exploring. And as the years have gone on, you then start to get to a point of, okay, I've explored a lot of countries now, I've been to a lot of places. Where do I actually want to spend my time?
- [13:04]
Alan Donegan
And every time you move, it's a risk, right? Especially if you're going to a new place and you're committing to being there for a few months. Like, well, what if you don't like it? What if it isn't quite what you wanted? It doesn't line up with your values or how you wanted to spend your time whilst you're there. And actually, we're both moving towards thinking about being way more settled, whether that means living somewhere permanently or much longer stays than what we have been doing. So, I don't know, four, five, six months at a time. Okay.
- [13:34]
Katie Donegan
We had the risk of Brazil. We arrived in Brazil, we'd booked an Airbnb, and the Airbnb, we arrived, it was dirty, and I spent a few hours cleaning, which, you know, like, fine, I'm a grown adult. I can clean. I'm actually quite good at it because.
- [13:52]
Alan Donegan
You tend to go down to your underpants and get the vacuum cleaner out.
- [13:56]
Katie Donegan
That's an image no one needs. So we cleaned the place, but then we went out bought vegetables to cook, came back, I pulled out the pans and there was no nonstick left. They were moldy, they were rotten. And there was a dead cockroach in the pans. And like, I just. And then there was loud music all day. And, you know, you can heap all the problems on there. That place was just not for us. And then we spend the next two weeks going, how do we get out of our Airbnb contract? How do we move? Where do we go? What do we do? And that's the actual cost of the travel sometimes. And then you look for reliability and you look for, can I consistently, like, go to a nice place with a comfortable bed, a good shower, good food, and I can look after my health? And you start to look for, where can I comfortably get those things around the world?
- [14:52]
Alan Donegan
And we've started to notice as well, where we feel more like we fit in in different places. Right. Because the culture will be different in different places around the different regions, different countries, different cities. And it's thinking, where does the culture align with how we want to be as well, and the people and all that kind of thing as well.
- [15:11]
Brad
Okay, yeah. There's so many factors, it's interesting. And yeah, obviously we're highlighting some of the negative parts of travel and that's just the reality sometimes, right? Sometimes even best laid plans, you get a bad Airbnb, even though you did your diligence and you looked at the reviews and you looked at the pictures and it just wasn't the case. Well, I mean, the nice thing is, a, there are people to help you often, and B, you can just move because you have assets and you're not stuck there. It's not. Again, it's sunk cost fallacy. Right. Like a lot of people would say, like, oh, but I've already spent this money. I'm here, I can't move. Well, okay, yeah, you've spent the money no matter what at that point, like, do you just stay and be miserable and live in a place that is loud and dirty and you don't want to stay in? Or at that point, you make a decision to move regardless of whether you get the refund or whatever. I think that's the nice part about having flexibility and assets, which we literally.
- [16:04]
Katie Donegan
Used the zero based thinking question in that exact instance, which the question is, knowing what I know now, would I rebook this Airbnb? And the answer is immediately no.
- [16:17]
Alan Donegan
There was a four letter word before the no, wasn't there?
- [16:20]
Katie Donegan
I may have. And you say no and then you Go well, okay, Based on that answer, your job is to get out as quickly as possible. And you can actually apply that question to every area of your life. So the people listening to this right now, if you ask, knowing what I know now, would I rebuy the same car that I'm driving? And if the answer is no, your job is to swap it and get a car you actually want to drive. And you can even do it with the house you live in or the city you live in. Knowing what I know now, would I move to the same town? Would I live in the same house? And if the answer is no, your job is as quickly as possible to get out and find somewhere else because you are somewhere that you don't want to be. And you're doing it because of sunk cost fallacy and because of all those other reasons. But that's not helping you live your best life.
- [17:12]
Alan Donegan
Can you apply it to the people around you as well?
- [17:14]
Katie Donegan
Knowing what I know now, would I still go out with Alan? You can, but it's a dangerous question.
- [17:20]
Brad
That is a bit of a dangerous question. But yeah, you really can apply to your job, to anything. And I think so many people get bogged down in feeling stuck. Feeling stuck because yeah, for a host of reasons, but some cause fallacy is one of the biggest ones, like, oh, I've put so many years into whatever to this relationship, to this friend, to this job, to this whatever, I couldn't possibly move. And it like the reality is, and I say this probably every episode, guys, we get 80 or 90 years on this planet if we're really, really, really lucky. And the whole point of FI, as I see it, is to move as many of those years into your side of the ledger, if you will, of like being able to do what you want with your time. To me that is the goal of FI at its essence. It's how can I control my time? How can I control what I do with the only resource that I can't get back? And I feel like so many people get bogged down in wasting years in all these aspects, one more year syndrome in their job or staying in a relationship that's not serving them. Or again being friends with people that, hey, I was friends with 20 years ago and it was great then, but it's not serving me now. Right. Like all of these things that zero based thinking can be applied everywhere and it should be applied everywhere.
- [18:38]
Katie Donegan
Yeah, I feel like we should tell everyone, pause now and think through job, friends, car, house, breakfast. Knowing what you now know.
- [18:48]
Alan Donegan
You didn't include partner.
- [18:51]
Brad
Breakfast is way more important. Come on.
- [18:53]
Katie Donegan
Knowing what you now know, would you choose it again if the answer is no? Your job is to get out as quickly as possible because exactly as Brad said, don't waste the years of your life on something that's not working. Get out and change.
- [19:07]
Alan Donegan
And that this is not an opportunity to beat yourself up for a previous decision. You made that decision with the best of knowledge. This is not to say like, yeah, to tell yourself off for that. It's just to say, okay, now me now, which will be different from who me was three, four, five years ago. This isn't right for me anymore. And happily move on and do something.
- [19:29]
Katie Donegan
Else as quickly as possible.
- [19:31]
Brad
I love that. And that's the thing, right? We get new information here in the US Years ago there was this. People would get tagged politically as like, oh, they're a flip flopper. And it like, what it actually meant was they just changed their mind because new information came in, right? And it's obviously there are those people who just change their mind with the wind and whoever's there, right? I'm not talking about those kind of people. But like, if you get new information and you're not changing your mind, that's a way bigger issue than sticking dogmatically to something that's like insanity of the highest order. So, I mean, I think you guys have probably seen that over and over again on your travels also, Right? Like, I suspect strongly now, granted, 2020 was a weird year, but I suspect strongly your travels in 2022 look dramatically different than your travels coming up in 2026. Just because you've learned new information, you've learned how long you want to stay places, how much you like traveling micro things like how important walkability is, how close you need to be for something to actually be close, and what it looks like to have things in your neighborhood. Like, I imagine even your not even, but your searches for places have changed dramatically in those couple of years.
- [20:41]
Katie Donegan
Yeah, big time. I mean, you talk about walkability. We went to Johannesburg, loved Johannesburg. But it's not safe to walk at night. And then Katie and I love to walk. I love to walk after eating food. It helps me digest, it helps me think. I sleep better. And then we are literally pacing around car park compound of our building, the parking lot, the parking lot, because you can't leave. And then like, I'm doing circuits in a car park and this is my life. I don't want to do that. So now in the current place we are, we can walk along the beach at night, you can hear the waves crashing. It is pretty beautiful. And we have long walks, long chats, talking about all the subjects. Then it's a different way of life. And you do learn those things. You also wouldn't know that unless you went there and tested it and tried it and spoke to the locals. You just don't know until you get there. So you make the best decisions. You can have a go and then change.
- [21:43]
Brad
Right. And that goes harkens back to old poker thinking. Like Annie Duke, who wrote the book, Thinking in Bets is you make a decision with the best information you have at the time. Sometimes that decision turns out well, sometimes it turns out poorly. But you can't look at the result and then look backwards and say, oh, it was a good result, so therefore is a good decision, or is a bad result and therefore is a bad decision. That's not the way it works. You make a decision with the information available at hand at that time. And what you try to do in life is get better at thinking. That's actually what we're doing here. It's not just looking at haphazardly making decisions and hope you get lucky. It's honing in on what's important. And just one other thing about, like, not knowing is Bali was the perfect example. We spent a couple weeks in Bali, and Bali, the Five Freedom Retreat, was absolutely wonderful. Let's be clear. It was truly wonderful. Amy did an amazing job. Bali was a little more crowded or a lot more crowded than any of us anticipated. And I think a lot of us were taken aback and surprised by that. When they have an amazing. Bali must have the best PR department in the entire world because, like, it's just as a country, because we all think of it as this idyllic paradise, and yet it's really overrun by most mopeds and motorcycles, and it's very busy and it's very hard to walk on the streets. It's almost impossible, in fact. And again, Bali is great, and it's clearly the fight for INF was great, but that's not a place that I would ever could ever live because it just was too crowded. I couldn't walk where I wanted to go. That was a surprise to me because I expected idyllic, serene paradise. And it was. It was not that.
- [23:23]
Alan Donegan
Yeah. Before you get a bunch of emails in, you called Bali a country, which, you know, that is.
- [23:27]
Brad
Oh, I said country. Oh, no, no, no. Yeah. Okay. Bali is part of Indonesia. It's one of the many islands of Indonesia. I know that for sure. But thank you, Katie.
- [23:35]
Alan Donegan
I'm talking about you saying about getting better at thinking, and you can't look at the outcome to know whether the thinking was sound. We often, when things don't turn out the way we wanted to, we'll ask each other the question, well, what have we learned from this and what will we do differently next time? And sometimes the answer is, nothing, I don't know. Or, like, there wouldn't be any different way of doing it. It was just the luck of the draw that time. And it didn't work out for us.
- [24:00]
Katie Donegan
Like the Copacabana, Airbnb. Like, I did my due diligence, I did my research, it was a good price. Like, I don't know what I would do differently. I genuinely don't know how to avoid that as a problem.
- [24:14]
Brad
And that's okay, right? Like, that's the cool thing is, like, there's a probabilistic nature of life. And that again, goes back to poker. Like, I was not a wonderful or even semi professional or anything like that poker player, but I was an avid poker player. And like, you learn about the probabilistic nature of life, right? And it's just sometimes you go in with two aces against do seven and I forget my exact probabilities. It was probably like a 95% plus chance at that point you're going to win. But one out of 20, you lose. That's just the way it works. That's how 95% works. One out of 20 you lose. And if you cry about it, then you made a bad decision or next time in that exact scenario. Now, I'm not talking about a different scenario. In that exact scenario, if you don't go in with two aces because you lost that one time, well, you're an idiot. You're giving up. 19 out of 20 wins, right?
- [25:06]
Katie Donegan
It's true. It's true. You have to go all in.
- [25:08]
Alan Donegan
I love how, how excited Brad gets when it comes to math or maths. And it like, like the strength of that reaction. Then Brad when you were like, you're an idiot if you don't maths. He's so calm when it comes to, like, math. Basic maths.
- [25:25]
Brad
Yep. Thank you, Katie. I know we share a love of maths, so. Oh, goodness.
- [25:31]
Katie Donegan
So another thing we wanted to share with you and all the people listening is a new innovation or a new way of thinking we had this year. And basically it came from me going, oh, we could visualize the average split of people's net worth in different categories okay. And then Katie went away and looked at all the data and found, like, how much of people's net worth is sat in their home. How much of people's net worth is sat in their freedom account? How much is sat in cash? Or cash, like things? And where actually is the average person's net worth?
- [26:10]
Alan Donegan
Yeah. Which led us to think about a different way of thinking of net worth of those different categories. So assets, like, we're familiar with, and we thought, rather than call them assets, why not call that your freedom fund? It makes it, like, a little bit sexier, a little bit more exciting to think. Well, that's the reason I'm putting stuff in that category. Right. Is to buy freedom, my freedom. So we had that, and then we had your home, which you've actually rebranded as a valuable liability.
- [26:41]
Brad
Okay, okay.
- [26:42]
Alan Donegan
Explain valuable liability, Alan.
- [26:44]
Katie Donegan
So you have this idea of, like, an asset brings you money and a liability costs you money. Like the car you drive costs you money and devalues. But an accountant would call it an asset, even though it is stripping wealth out of your pocket on a monthly basis. And the bigger one of these assets you buy, the quicker your money disappears. So then we're going, well, it's not really an asset, is it?
- [27:07]
Alan Donegan
But.
- [27:07]
Katie Donegan
But it has value, like you can sell it for some cash. So we called it a valuable liability. And the bigger the valuable liability you buy, the faster the money leaves your world. And in general, the bigger the house you buy. Yes, you've got a giant valuable thing, but you have more maintenance, you have more taxes, you have more. All of that stuff. Same with cars. You know, you compare a BMW versus a small. I don't even know what a small car. Do you have small cars?
- [27:34]
Alan Donegan
They don't have small cars.
- [27:36]
Brad
We're Americans. We don't do small. Come on. Ford F150 is small. Let's be honest.
- [27:42]
Katie Donegan
So F150 versus an F350. The F350 will strip money out of your pocket faster. So it's like a valuable liability. And what do 99% of the general population spend their money on? Valuable liabilities. They spend it all on the mortgage, the car. They're funneling all of their cash into valuable liabilities. So we did this visualization over the years of where people's money goes. And in the uk, and I'm pretty sure it's the same in America, but you can tell me is people end up close to retirement, owning their home outright, so they have a huge amount of money stacked in valuable liabilities. But very little in their freedom Fund. And they're kind of relying on. In the uk, it's called the state pension.
- [28:31]
Alan Donegan
Social Security.
- [28:31]
Katie Donegan
You have Social Security. They're relying on that. So that split for most people as they head towards retirement is all valuable liabilities and very little freedom Fund. And actually, we have exact opposite. We don't own a single valuable liability. We own nothing with keys. And our entire net worth is in our freedom Fund. And we started to think a lot about helping people to shift their split and where their money's going.
- [29:00]
Alan Donegan
The other distinction we wanted to make was between assets or your freedom fund, and leaving a bunch of money sat in cash so that we have as a separate element. Because a lot of people that we teach that, Come on, Rebel Finance school say, oh, I thought I was really good with money because I was organized with it. Didn't have any debt or consumer debt. I just kept all my money in cash, though. In.
- [29:24]
Katie Donegan
I'm a saver.
- [29:25]
Alan Donegan
I'm a saver. So by adding that as a separate element as well, we wanted to encourage people to move that bunch of cash over into investments that would actually work for them.
- [29:35]
Brad
Gotcha. I like that. So, okay, there's a whole lot there. So first you said you have this visual. Is this person by person or have you aggregated, like, numbers from a lot of people?
- [29:45]
Katie Donegan
So we use the aggregated data to, like, present it.
- [29:48]
Brad
Okay.
- [29:49]
Katie Donegan
Show what happened. And we sort of presented that on our website so we could share the visuals with you.
- [29:54]
Brad
Okay. We'll put that in the show notes for sure.
- [29:56]
Katie Donegan
I love that. And then we created a tool that anyone can put in their own numbers and it creates a tree map visual of their own split. So you could literally just like log in, put in what percentage of your money is in the different category and put the dollar amounts, and it will create a visual split so you can see where your money's going. And that element, I think, shocked people to see what percentage of their money was tied up in their house versus what percentage of money was buying their freedom.
- [30:25]
Alan Donegan
Yeah. And you said login. There's no login required. You just meant like, turn your laptop on, didn't you?
- [30:30]
Katie Donegan
I meant just visit the website.
- [30:33]
Brad
Okay, that's. Yeah, that's super interesting.
- [30:35]
Katie Donegan
So you do now, Brad, are you filling out your numbers to look at you?
- [30:39]
Brad
I'm not, no. I'm typing down my little notes. I think, seriously, when you're talking, I'm brainstorming. I'm always typing because I'm. I have these ideas and they come and go. So I have to quickly jot down notes or they're all gone. It's like here are the three different words I need to remember, but I think I missed one already. So, okay, first, risk versus volatility is an interesting one. So you talked about cash, right? I think a lot of people like misconstrue, like what risk is and what volatility is. And this is one of those things, like you mentioned that person who's been a diligent saver and they have all their money sitting in their checking account in cash, earning nothing, right? And let's say they have 200 grand there now they've saved for, for a long while, $200,000 just sitting there doing nothing, inert, earning zero percent interest, right? Well, at the moment there's no risk as they might look at it, it's safe. But I would argue that that is really significantly risky because basically it's opportunity cost. Right? So had they invested that money in low cost index funds or ETFs at an 8% annual return, we would expect that amount to double every nine years, right? So 18 years from now, that 200,000 sitting and checking out will still be $200,000, right. If it's earning 0% interest. If it was invested in market earning 8% annually, it will double every nine years. So it'll be 400 grand after nine years and then 800 grand after 18 years. So that's 800,000 versus 200,000. So well, along those 18 years there will be volatility. Obviously we know the stock market goes up and down and sometimes up and down significantly intra year or an entire year. But which is truly riskier? I think the answer is obvious when you look at it of hey, there's no volatility in keeping your checking account, but I would argue that's dramatically riskier.
- [32:29]
Alan Donegan
I think just to strengthen your argument as well, Brad, even if that was in a savings account that was earning a small amount of interest, you're still going to be significantly worse off. Because I think a lot of people would say, well I'm not, it's not in my checking account, I'm earning some interest. I just wanted to say your argument still stands if you are earning a small amount of interest.
- [32:48]
Katie Donegan
Well, if you compare that small amount of interest versus inflation, you're actually losing out because very rarely does the interest you earn actually outpace inflation. And then you go, well, I'm leaving my money in savings because I'm scared and I want safety. But you're actually guaranteeing a loss versus inflation. So the thing you're afraid of losing money is the thing you guarantee by keeping your money in savings. And I just want to like help these people see it and help them see they could be so much better off than to get their money invested. But it's fear. And the thing we've learned over the years is what you're afraid of, you end up doing weird stuff to avoid, which actually creates you're afraid.
- [33:34]
Brad
Right. They are literally leaning into the thing that they are scared of the most. That's. Yeah, that's crazy. But yeah, I see it over and over again. And just a couple other super quick things. So your home equity, I think this is something a lot of people get bogged down in and we've seen this in this whole middle class trap argument. Nonsense is in general terms, your primary residence home equity does not. It counts in your net worth. When you're, when you're just collating your entire net worth, it counts, but in it's not part of your investable assets towards your FI number. So this is a really important distinction. You might be wealthy and have a couple million dollars in, in home equity in some weird fringe case where you live in California and you have $3 million in home equity in your home, but only a couple hundred grand in investable assets. The simple fact of the matter is you're not fi. And that's fine. You, you know, that's okay. But you've made a decision. And that's the other thing is you've made a decision and you keep making a decision every single day to keep living in that house. And now you could be fi almost anywhere in the world other than in that space in that house. So we all make decisions and you can make whatever decision you want, but it's important to know that the money that's just sitting there in your home equity, we just don't include it in our FI number.
- [34:46]
Alan Donegan
And that's why we made that visualization to help people to see it. And when you can see that, rather than just numbers and zeros and commas and stuff, to actually see it as the size of it comparatively to the other elements is really powerful. And that's what we found from showing that to people.
- [35:03]
Katie Donegan
Because the extreme example you just said is actually a real example from a friend in the uk. He had a very nice apartment in London that he bought in the 80s. London went up ridiculously. It's worth £3 million. But he hadn't saved or invested anything outside that so he's worth a fortune but cannot retire. And he wants to live in that one house. And his entire net worth is tied up in a valuable liability that you can't live off. You can't eat the bricks you live in. It won't feed you. You need money to buy pizza and other essential items.
- [35:41]
Alan Donegan
I think in that simple scenario, we would have been willing to eat the bricks.
- [35:45]
Katie Donegan
I would have eaten anything at that point.
- [35:46]
Brad
I mean, seriously. Yeah, at that point. Let's be clear here. But yeah, like I said, we'll include that link in the, in the show notes. But lest anyone, I'm sure there'll be people yelling about the, like the valuable liabilities and house versus car. And obviously cars are depreciating assets in most cases. Homes aren't technically depreciating, they're appreciating by a tiny little bit. But like you, you both talked about, there are just a ton of expenses that go in annually into your home. And when you do any type of simple scrutiny over how much money you're spending in your home, it's a whole heck of a lot. So I, I don't think anybody factors that in when they're looking at the return on their primary residence. And I think the other thing is a lot of people who aren't in the fight community aren't saving money. They always look to, oh, but my home is my biggest asset, my biggest source of net worth. And like, the sad fact is that's true, but that doesn't mean it's the right thing to do. It's just, it's an artifact of this is nobody else is saving any money and therefore their home is the only shred of wealth that they actually have. And you just do a simple compound interest calculator. I think I went to NerdWallet and just typed in like, hey, I'm just saving $500 a month at a simple 8% return for 30 years, you're going to have three quarters of a million dollars, in this case $745,000. Like, that's $500 a month. If you're making 100 grand across two of you and you save $6,000 a year, that's only 6% of your gross income saved, and you're going to have three quarters of a million dollars, that's going to almost certainly outpace home equity for the vast majority of people. And that's not a fi person, that's just a regular person saving 6% of their, of their gross income. So I find it really hard to imagine almost anyone other than these fringe cases, almost anyone in the FI community, is going to wake up in 30 or 40 years with their home, the home that they live in, as the biggest source of their net worth. I just. There are fringe cases, of course, but come on, guys. It's so fleetingly rare. It's. It's crazy.
- [37:46]
Katie Donegan
It's fleetingly rare in the fire world. I think it's the norm in the rest of the world.
- [37:51]
Brad
Yes.
- [37:51]
Katie Donegan
Which is a really interesting distinction. And then you go, well, we're trying to reach out to people in the rest of the world and help them to come over to our side and get investing and to earn money. And I think to back up your bit about the homes, the reason everyone thinks homes are so good is the back of the envelope maths that everyone does. I bought it for 100 grand 20 years ago and now it's worth 250. Therefore, I've made a 150 profit. And that's literally the back of the envelope maths that people do. That doesn't include your costs of buying, your costs of selling, all of the other costs that you have. But that back of the envelope maths is what makes property have a good name in this world. And you hear people literally saying, I bought the house for this, I bought the house for that. That's what I've got.
- [38:40]
Brad
Yeah, it just, it doesn't work that way. But it's too hard. It really is too hard for most people to actually do the calculation, myself included. And yeah, the simple thing is just to look at that. But also, they don't even realize the amount of time. Most people don't understand the length of their lifespan. It's like if you bought a house for $50,000 in 1985 and it's 40 years later and it's now worth 400,000. That sounds like an amazing thing. But you would expect that to double if you had that money in the stock market. Double, minimum, four times, probably closer to five. Right. So that's 1002-004008-00000. And realistically, over 40 years, it would probably be closer to, to that next double, getting closer to 1.6 million. That vastly outweighs the, hey, my house went up to 400,000. And that's even just the rudimentary way of looking at not counting all these costs. So I think very rarely this is a very long way of saying, like, your home is something to live in and that's very important. But let's not misconstrue it with like, the most valuable asset for people in the FI community. So why don't we shift gears to talking about something that is the most valuable asset for most people in the FI community? And this is our mutual funds and index funds. And there's been a lot of talk recently about people not believing that when the time comes that those of us in the FI community will be able to sell our shares and live off. Live off, essentially the 4% rule, which is just, hey, I've put this plan in place for 10, 15, 20 years. I've reached the point where I'm fi and then that literally selling the shares will be so insurmountable psychologically that they won't be able to do it. And therefore, in essence, the logical conclusion to that is like, FI is junk and this doesn't work. You need some other type of income stream. I've been on record saying I think this is utterly preposterous to the highest level. Have you heard this talk at all? Has this crossed your plane?
- [40:37]
Katie Donegan
I think there's a whole piece of like, oh, all of the bloggers and all of the five celebrities, I don't know what the word right word is.
- [40:48]
Alan Donegan
Content creators.
- [40:48]
Katie Donegan
Content creators.
- [40:49]
Alan Donegan
Thank you.
- [40:50]
Katie Donegan
All of those people. Well, they proved it doesn't work because they still own money. Which is a really weird logic of because they still earn money, it doesn't work. And one of our favorite examples is Christian Bryce from Millennial Revolution. And they actually split their portfolio into portfolio A and portfolio B. And they retired on a million and they kept that million in portfolio A and go, have we been able to live off that? And then anything extra that they've earned through books and other stuffs, they put in portfolio B so that they could have the purity of the 4% rule test. I think they're still going because of.
- [41:28]
Alan Donegan
This very debate, right? Like, oh, well, it doesn't work because you'll just earn more money afterwards anyway. Yes, that's exactly why they did that experiment.
- [41:37]
Katie Donegan
And they update it every year, tell whether it's worked or not. And it has, and it's really interesting. Like it's this fear and this doubt of does the stuff actually work. But having invested, we started investing in 2015. So it's been about 10 years now and our net worth has over doubled since we retired six years ago. So I know you said like the stock market doubles every nine years. Like our experience has been it's more like six. And it's kind of mental seeing it happen. Then you feel A bit more comfortable and a bit more relaxed. And people are like, well, no one ever sells any shares. I sold 10 grands worth of shares to buy universal trip tickets to go on roller coasters and to do cool stuff for our wedding anniversary. Like, I sell shares to do cool things. Why would I not? Like, I've spent years building up the portfolio to get to a point where I can spend the money to have an incredible life. That's the whole purpose of this.
- [42:37]
Alan Donegan
And I think even if you didn't need to sell those shares, if you had income that covered your lifestyle from other things, whether that's businesses or whether that's whatever it is that that income is coming from, that doesn't mean that the 4% rule doesn't work. It means, like, why are you going to sell your shares if you don't need to? It doesn't make any sense, right?
- [42:58]
Brad
It's this weird purity test. Like, the only people that are living the fire life are those who are selling explicitly and only 4% of their assets every year and making $0 of income from anywhere else. Like, that's so preposterous. I mean, we're the smartest, most industrious people in the whole world in the FI community. And to imagine that we're not going to make money from something else ever is ridiculous. Or that we're going to have rental real estate or some dividends that happen to come in, whether we're overtly doing that or not, or have some little pension or have some Social Security. Like, that doesn't render the entirety of FI null and void. It's so. It's so stupid. Like, when you say it out loud, it sounds so ridiculous, obviously, right? But also, and I think this is really important is selling shares, okay? You have saved your entire FI journey. I won't say your adult life, because there are many people who get into FI after they've gone through some financial difficulties, right? But on your FI journey, you've been saving money and now comes the time whenever that is. And whatever percent of your annual expenses it is you need to cover by selling shares, whether that's 100% of your income that you need to cover each year or just a portion of it because you have other money coming in and it doesn't matter, right? Like, it still works, but you have to click sell. And listen, I'm not going to lie. I think that will be hard. But I think it will be hard for five minutes, okay? Like, I think it legitimately will be hard that one time the Very first time you go to log into your brokerage and instead of buying shares, you're selling shares. I legitimately think it will be psychologically difficult, but we're adults. We do hard things. This is part of being human. What are you going to do? Cry and run away? Like, I, I'm purposely playing this up, but, like, literally, what are you going to do? Cry and run away and say, fi doesn't work because you can't type a couple of digits in and press the button that says sell? Like, fi doesn't work. It's null and void because you experienced a little bit of discomfort for five minutes. Are you freaking kidding me? Like, honestly, are you kidding me with that line of reasoning? And like, there are legitimate people who have this line of reasoning. And I think it's the dumbest thing I've ever heard. I think it's like if it was said by the Susie Ormans of the world, we'd be calling it absolute clickbait nonsense and en masse, we'd be yelling at them. This is unbelievably stupid and I just simply won't stand for it. It is going to be hard and it'll be hard for five minutes. But you're an adult and you can overcome things because you've overcome things your entire life and then, you know, want to know what? You are the type of person then who sells shares and the next month you just log in merrily, whistling all the way, and you click sell. And then the next month it's even easier and you're just a person who lives off their assets then.
- [45:47]
Alan Donegan
It's interesting to think about the fear that people might have had when they started investing and started buying. Right? Like, people are nervous and scared to buy those stocks for the first time. For the first few times, maybe. But when you get used to it, they whistle merrily in and buy, right?
- [46:07]
Katie Donegan
Even when it's going down, they're like, stocks are on sale, let's buy.
- [46:10]
Alan Donegan
So it's exactly the same. It's just something that you get used to.
- [46:14]
Katie Donegan
I think there are a huge number of people out there who literally organize their lives to avoid ever having to sell anything. So they will over earn and buy dividend stocks and do all this other stuff just so they can live off the dividends and never have to sell anything. We actually had an example come in from that, didn't we? Should we read the example?
- [46:38]
Brad
Yeah. Ren.
- [46:39]
Katie Donegan
Okay. Hi, Brad. Huge fan of the show. Five years ago, I had a dream of being able to retire early via Dividends covering my life costs. So this person is literally trying to get just the dividend portion of their income to cover their entire life costs. On the show, I've heard you mention dividend investing is sort of a third rail of investing. And I'm not sure if I'm making a mistake with my plan. I'm 44 years old and have a net worth of five and a half million dollars. My brokerage pays me 105 grand a year in dividends. Last year it was 87. The year before it was 58. And my goal is to get that to about one hundred and twenty, which we are close. I love my job, want to keep working as long as it's still fun. Am I way off or do you think dividend works? If you can live off the cash flow while investing overflow back into VTI or Voo, etc.
- [47:37]
Brad
Well.
- [47:40]
Alan Donegan
So much to unpick.
- [47:41]
Brad
Yeah, there's so much. I definitely, obviously want to hear your opinions on this. But just to be clear, like, getting dividends from your investments is not a bad thing. When you invest in mutual funds and ETFs, you are going to get dividends because some of the companies in those funds just kick off dividends. That's part of their corporate strategy and they kick off dividends and that's great. Okay, so I'm not telling them to send them back. I don't want them just throw my money out, you know, rip up the check. Right? Like, those are great. I think where the third rail, the quote unquote, third rail investing comes in with like people who are overtly following the dividend investing. And I, I think of it as capital D capital. I dividend investing strategy. And like they're just buying stocks that kick off big dividends and like that's their strategy. I think that is a significantly suboptimal investing strategy because basically a dividend is just part of the company. The company is just returning a part of itself to the, the owners of the company. And you are one of the owners of the company and they're sending a piece of your company back to you in what is a forced taxable event. So dividends are taxed and you're losing flexibility. I personally don't, I don't like to lose flexibility in any aspect of life. So I'm getting this forced taxable event. And basically how I look at it is like companies can do a lot of things with their excess cash, right? Like they can give dividends, they can repurchase shares, they can buy New companies, they can pay down debt, they can do a whole bunch of things. And really, dividends, I jokingly call it, like meekly capitulating is what they're doing because they have no better use for the money than just kind of meekly paying it back as a dividend. And I just would rather have companies that aren't at that point in their growth or their lack of growth cycle where they have nothing better to do. They can't invest in new business lines, they can't upgrade their facilities. They're just kind of rolling along. And those, those can be great companies, let's be clear. But they are just doing their thing. And that's not necessarily the companies that I want with all of my assets. So those are like the people who are dividend investors. And, you know, listen, is dividend investing better than sticking your money in a checking account? Of course it is. Like, we're kind of like splitting hairs here at the end of the day. But I just think it's a suboptimal investing strategy. Now Sean is talking about something else. Sean is basically, it sounds like he's investing in VTI or voo, which are the Vanguard Total Stock Market and S&P 500 ETFs, with a lot of this. But he's trying to get the dividends from those funds to pay for his life expenses. And while that's not a terrible plan in and of itself, it sounds like he is probably fat five by a significant margin, because I think those funds give off under a 2% dividend or thereabouts.
- [50:46]
Alan Donegan
I'm just looking up now 1.2, 1.2.
- [50:50]
Brad
Oh, goodness. So if Sean gets to the point where he's living off the dividends, he's basically doing a 1.2% withdrawal, which means by a factor of three, he basically overworked, he's fat fi many times over. And that just seems kind of crazy to me. And it also suggests that I think people misconstrue dividends as some kind of magical income when it's really not. It's. It's only dividend income because we call it dividend income for tax return purposes. It's like the company's just giving you some of the cash back that they have sitting in their bank account. Like, it's not magical income. It didn't. Like, of course it. It ultimately came from income within the company, but it's just money sitting in their bank account. And they said like, hey, owner, take a dollar of it. Like that. That's what they did each owner gets whatever cents or dollars per share that they gave back. Like, there's nothing magical going on here. So I think Sean is, like, is kind of conflating some things.
- [51:45]
Katie Donegan
We had a little look at the numbers, and it was like, well, the aim was to live off 120 grand a year, and you've got five and a half million dollars net worth. And when we read net worth, we were like, well, okay, that total net worth probably includes his home. Maybe didn't, but let's just imagine it did. And he's only got 4 million invested. At 4%, that still gives you 200 grand a year to live off. So he's like, way past his number. And that's partly, like, sometimes, and I don't know whether this case with Sean, but I'm going to, like, generalize for everyone to listen to, is that I don't want to sell stocks off, so I'll just live off the dividends. Then you have to go way past your number because they don't pay that many dividends, and you end up working years longer than you needed to. Which Sean said he loved his job, wants to keep working. That's cool. But as a suboptimal strategy, like, you were done probably five years ago.
- [52:41]
Alan Donegan
Well, yeah, if you think that his aim is 120 grand times 25, that's 3 million.
- [52:47]
Katie Donegan
Yeah.
- [52:47]
Alan Donegan
So he's got five and a half years. Even if his home was worth two and a half million, then he's there.
- [52:52]
Brad
He'S still fine, which is great. Which is great news for Sean. Right? That's absolutely wonderful. And it's. It's interesting that I love my job and want to keep working as long as it's still fun. Sean, that's fantastic. Right? And I would argue to anybody out there, that's fantastic. But it's kind of this, like, misdirection. It's like a red herring kind of argument of it doesn't matter. Like, you can stay in your job as long as you want to. That's great. But, like, that's not relevant to. I'm pushing back my fi date because I happen to love my job. Like, if you love your job, stay in your job whether you're fi or not. But don't arbitrarily say, I'm not phi yet and misconstrue the math based on some conflating like, but I love my job. Like, if you love your job, stay in your job for the rest of your life. That's great. But I think we also need to understand, like, with time and resource freedom, we have every option in the world, literally. So this is an another opportunity cost argument, right? Is like Sean is saying, like, yeah, I love my job, but my counter argument would be, Sean, you have enough money to do whatever you time and money to do whatever you want in the entire world. So in the range of literally billions of options is the number one on that list. When you rank order the billions of options of things you can do with your time and money, working at the exact job you're in, in the exact capacity, for the exact number of hours with the exact people, like, if that happens to come up number one. Oh, goodness. You should play the Powerball every single day of your life. Like, you are just. It's amazing. You've killed it. Like, it's. I'm a little snarky today, guys, if you couldn't tell. But very good nature.
- [54:31]
Katie Donegan
I love it.
- [54:32]
Alan Donegan
You're really leaning into this.
- [54:33]
Brad
I love it in a very good natured manner. I hope everybody can read that. But yeah, I'm a. I'm a little on today, but it's, it's impossible. And I hear this all the time. But I love my job. But I love my job. Like, that's freaking great. Stay in your job. Okay? But if you're actually honest with yourself, you have all the options, the entire world, the chance that you would pick your exact job is approaching zero. Now, what that could mean is, hey, I do love aspects of my job. I want to stay in those aspects. Like, that's a different story altogether, right? Like for a certain percentage of it or for a certain number of weeks or months a year. Like, again, totally different. If by some chance that is in those billions of options, that is at the very top rank ordered, but I still find that relatively hard to believe. But if that's you, then that's great. Like, what do they say? Tap dance all the way to work, right? Like a Warren Buffett style. So do your thing. But what do you guys think about this?
- [55:24]
Katie Donegan
I think there's so many options in the world. And I think. I'm not going to speak specifically about Sean, but for the whole.
- [55:30]
Brad
And I'm not picking on Sean. Let's be clear. Sorry, Sean.
- [55:34]
Katie Donegan
We'll give him a hug.
- [55:35]
Alan Donegan
Brave and written in.
- [55:36]
Brad
No, Sean's wonderful. Thank you for writing Sean. And let's be clear. Sean is killing it. Sean is fat, fi, rocking and rolling. Loves his job. This is great. I mean, Sean has a wonderful life.
- [55:46]
Alan Donegan
It sounds like, and he's a huge Fan of your show, Brad, so.
- [55:49]
Brad
Which is amazing. Thank you, Sean.
- [55:51]
Alan Donegan
Taste as well.
- [55:52]
Brad
Yeah. Hey, I like it.
- [55:55]
Katie Donegan
So I've completely forgotten what I was going to say.
- [55:58]
Alan Donegan
I'll say something whilst you do that, which is to broaden the point. So we're not necessarily talking about Sean here but for people that say, well I love my job and often they might use that as a reason not to sort their finances out or as a reason to kind of stay in their job or the, you know, the one more year syndrome. I think often it's there's the whole psychology in there of maybe fear of the unknown or kind of a bit of avoidance of thinking about how you want your life to be. And it's like, well this is quite good. So I'll just keep this.
- [56:31]
Katie Donegan
It's the avoidance of thinking. It's easier to stay in a job that, that you love than it is to think, oh, what about that dream I had as a kid? Or could I do this? Or what else could I do? It is easier to keep status quo than it is to think. And I think a huge number of us are anti thinking and then anti the action that comes afterwards. And that might be because like thinking takes up lots of calories. So let's not do it.
- [56:58]
Alan Donegan
Let's just self evolutionary type.
- [57:01]
Katie Donegan
Evolutionary type.
- [57:02]
Alan Donegan
Why? We don't like to think as humans.
- [57:04]
Katie Donegan
But we generally don't. But it's actually a really tough thing to think. What would I do with my life if I wasn't working? And that's why people put it off till after they finish working and then they have to crash. But I'd say to everyone that thinking is critical no matter what stage you're at, even if you've just started your job. Start to think even more. Like, is there a better version? What could I do? How can I get promoted? Where else could I go? That's the thinking that leads you to where you want to go to and.
- [57:34]
Alan Donegan
We know that that's difficult. And we've got a little PDF guide that we can put in the show notes that helps people think through, which.
- [57:42]
Katie Donegan
Is the one Brad did in Bali at the event.
- [57:45]
Brad
Oh yeah.
- [57:46]
Katie Donegan
All the questions for the different life areas to think through, like where would you live if you had to? What job would you have if you had to? Career remission and all of the different questions. Do you remember that workshop?
- [57:57]
Brad
Of course I remember it. Yeah. In fact I was just chatting with Aaron about this recently where we were talking about like the. It was just such a wonderful two part section of, of the entire retreat where you laid these parts out. And then we had dedicated time to spend thinking and writing about them. And it was focusing on the ones that, that we really, that impacted us the most. That was a highlight of the retreat.
- [58:22]
Katie Donegan
So for everyone listening to this, we'll put it in the show notes. You can download the guide. It is a set of prompts to help your brain think about the next version of each area of your life. Because it's very difficult to answer the question, what do you want? Like, if you stare at someone and go, tell me what you want, like, they'll literally freeze. Their brain will go, I can't cope with that question and it will stop. Whereas if you break it down into areas and you go, okay, what do I want my life to be like in health and wellness? But you start to ask the questions, what does a healthy lifestyle look like for me? How do I want to feel in my body when I wake up? How do you take care of your body and mind? What are your fitness goals? How do you manage stress? And there's a bunch of questions and prompts to help you think about how you actually want life to be like. And it's really interesting when you start to do that exercise, you start to have a little bit of a wake up call and go, oh, maybe I'm not at the optimal place I want to be at in all of these areas. And that's what will happen when you start to think about them.
- [59:28]
Brad
Yeah. And I think that's another cool aspect of Fi is that this is so not just about money. It's almost silly to think that Fi is just, I couldn't have done 700 plus episodes if it was just about the nuts and bolts of money. It's. That's a tiny fraction of this. Right. It's just you get your money straight so that you can live a better life. And there are fleetingly few people who have nailed all eight aspects of the life as you've delineated it. It's. And, and that's okay. We're all works in progress, right? Like, we're all just trying to figure it out. And nobody has it all figured out. Nobody does. And even if you did, on some level, like, the world keeps moving, your life keeps moving and changing. Like it's constantly changing. You have to update your thinking. And all three of us see this constantly in our own lives. Like again, going back to 2020 to 2022, you probably had grand ideas of what your life was going to look like for the next couple of years in terms of travel and how you spent time and who you spend time with. And like, undoubtedly that has changed dramatically. And that's okay. That's not a failure. It's not 2021. Alan and Katie are failures. It's. You've learned things along the way, you've updated your thinking, and you're going to move along accordingly. And that's. That's what it means to be human.
- [60:42]
Alan Donegan
And actually, really cool stuff comes out of it. Going away you didn't expect. We wouldn't have developed Rebel Finance School if we hadn't been locked down in the UK with nothing to do. We would have been doing very different stuff. And that's one of the things that we're most proud of that we've done ever. Well, I'll speak for myself. That's one of the things I'm most proud of.
- [61:03]
Katie Donegan
And I am, too. Quick, fire one off the list, Brad, because I thought it would be quite interesting. People misconstrued your comments about Tesla as political. I'm interested to know, like, was it political? Was it not? No.
- [61:18]
Brad
Yeah, this is funny. I'm glad. Yeah, this was one I put on the list that I wasn't sure we were going to talk about, actually. But, yeah, it's funny how I. I think I. I think this is what happened is on the J.L. collins episode, I might have called Tesla a meme stock, and this naturally enraged a bunch of people who are Tesla diehards. But it's hilarious because I think people looked at that as political. And anybody who's been listening to this podcast for the entirety of it knows I'm not a huge Elon Musk fan. This goes back to 2017, and while I think what Tesla has done to a large degree is very positive, I think the valuation of it is absolutely insane and not tethered to any type of reality. And I think almost by any definition, it's a meme stock. And just almost by its definition in that, like, this is a declining car company that's declining year over year, and they're basically basing a couple trillion dollars in value on things that are total vaporware, essentially these, you know, robots and the. And this robo taxi, when Waymo is actually already producing an autonomous vehicle and has been for years now, and Tesla is in this tiny little geofenced area in Austin, and when they did their robots, like at one of their most recent events, they literally had someone behind the stage, like, orchestrating the robot. It wasn't even an autonomous thing. It was like, by anybody else, it would be fraud, but because it's Tesla and Elon Musk, it's like, it's okay. So anyway, I just, I think anybody who looks at valuation aside from these Tesla diehards, so essentially the only people who could say, like, oh, Tesla's worth its valuation are the people who have made a lot of money from Tesla. So you're almost proving yourself that way. And I guess just the political aspect is like, if people thought I was like, yelling at, oh, Elon's a bad person because he's friends with Trump. Well, do those people now agree with me? Because now the first buddy is like the first enemy. So it's kind of. It's just hilarious on its very face. Like, are those people now cheering me on? Because they, they misconstrued that. I was saying it as a political matter. I wasn't saying it's a political matter. I think he's a charlatan to a large degree, and that's fine. He has produced great things, but he's also produced a lot of promises that are not even close and some things bordering on fraud. So, yeah, that's kind of my two cents. But, yeah, it wasn't political in any sense.
- [63:40]
Katie Donegan
Yeah, it's interesting. And when you get into, like, the whole stock picking thing, that's when Katie and I go. We don't really care about which stocks do well because we just own the index fund and we forget about all the of it, which is the simplest way to do it. Then you don't even have to think about which company is valued, which price. There's many other exciting things to think about.
- [64:01]
Alan Donegan
What do you like to think about, Alan?
- [64:03]
Katie Donegan
Let's not go there on live show.
- [64:07]
Brad
Oh, you too. So, yeah, let's. Anywho, it will be the transition. So, yeah, I know I have a hot take on that. But yeah, if this is a car company, it's overvalued by 90% and the stock should be cut 90% if it's based on fictional things that might be in the future. Well, when those fictional things do or don't come to pass, then great. And then it's worth something. So, you know, we'll kind of see from there. All right, I think we should move on from that one.
- [64:37]
Katie Donegan
Yes, let's move on from that one.
- [64:39]
Alan Donegan
Katie, why do you dislike the Robinhood app?
- [64:43]
Brad
Brad, you're just trying to incite me today, aren't you?
- [64:48]
Alan Donegan
I can see you're on a roll.
- [64:49]
Brad
Yeah.
- [64:50]
Alan Donegan
Shall I give that a bit more Context.
- [64:52]
Brad
Sure.
- [64:53]
Alan Donegan
So this is a message from Kyle. He says, I consider myself a new fi motivated individual. I've been investing extra income into a taxable account after building my emergency fund, reducing debt and contributing to tax advantaged accounts.
- [65:08]
Katie Donegan
Good work, Kyle.
- [65:09]
Alan Donegan
Well done, Kyle. Can someone explain the level of disdain Brad has? Wow, we'll come back to that. Brad, if there is a level of disdain, is it simply because it encourages a gamble style of investing or is there a larger problem with the platform? I was attracted to it a few years ago when I first started this journey because of its user friendly interface. I use it to purchase mostly broad market ETFs and a couple REITs to have some skin in the real estate market. Have I started the taxable brokerage portion of my fee journey on the wrong foot?
- [65:40]
Brad
What a great question. And, and I love the. Kyle's a great writer. By the way, the level of disdain Brad has for Robinhood, that's great. Well, first off, Kyle, you're crushing it. You're absolutely doing great. So there's no worries. Take a deep breath. You are doing wonderfully, my friend. So do not worry. You're not on the wrong foot. Everything's fine. Sounds like you're investing in a very intelligent manner, as would befit a listener of Choose a Phi. So I have no, no issues there. Yeah, I mean, as you said very simply, it is because it encouraged a gambling style of investing. And I don't think there's anything more there. I think over the years there have been some allegations of some other minor issues with Robin Hood. I don't really believe any of those. They're a publicly traded company at this point. They're doing exceedingly well. I don't have any, any issues with Robinhood other than that it seems like the app has always been geared and in fairness, I haven't logged into the thing in a couple years. So it may have changed. I don't think it has. But it has always been geared towards basically addicting people to gambling. And there are a lot of apps that addict people, especially a lot of young men, to gambling and just actual gambling. And I think treating investing as gambling is what a lot of people erroneously do. And the three of us know investing is a long term pursuit. This is a, for us, for the three of us, it's a 50 plus year pursuit. For many people, maybe Kyle's just starting out, it's a 60, 70 year pursuit. It's not about, hey, Robin Hood showed me these, this confetti and green today because it went up or red because it went down and it's yelling at me like. And I'm kind of making that up but. But not all that much. And they just facilitate, they facilitate a gambling style. And listen, they're a company, it's served them well. Their stock is flying high. I don't normally take that approach, but they can do what they want. I don't have like a. I don't think they're bad people necessarily, but I just think it leads to some problematic behavior potentially. And if all things equal, would I rather someone invest at Vanguard, Schwab or Fidelity? Yeah, you bet I would. But is Kyle on the wrong foot by investing in low cost index funds and ETFs Robinhood? No, I don't. I don't think so. What do you guys have people asked you about Robinhood?
- [67:51]
Katie Donegan
It's come up and there's plenty of other platforms that are exactly the same. And I just like looking at the homepage of Robinhood. The opening banner is built for the future of trading, trading, Analyze, buy and sell with tools purpose built for how you trade. And then they show candlestick indicators and graphs and all of the other stuff that we know is about trading. So the whole platform is built around the idea of trading. You can use that tool to buy index funds and you can absolutely do that and there's no cost to doing that. But we generally have a problem with platforms that sell you on those stocks because we see people get bought into it. It's like, oh, they flagged up this stock, maybe we'll do well. And it's showing well on the candlestick indicator and the confidence this and the, you know, opaque darkness of future possibilities level indicator. It'll do well. And we kind of have a problem with them like selling that because we know people get bought into it. Then they come back to us and say should we do this? To which we then go, no, don't do that. Just stick with a simple index fund. But you can use that platform to get an index fund. Same with all the ones in the uk.
- [69:05]
Alan Donegan
Yeah, it's just whether you kind of trust yourself to not be sucked into the stuff, the trading side of it, which our philosophy is don't go anywhere near that. And I think it's slightly different in the US because you don't tend to have any fees to use the platform or the provider, whereas most other countries that we've come across do that. You do in the uk. There are a few free ones now, but most platforms have a fee. So a lot of people get sucked in by the fancy marketing of those platforms and then they'll have a high fee to use the platform. So what we always come back to are what are the fees and what are the funds you can invest in and what are the fees on those funds? So when I say fees, the platform fees and then the fund fees and just minimize those. And if you can ignore all the other stuff around it, then go for it. But if you're ignoring all the other stuff around it, why are you going for that slick app anyway? Right?
- [69:59]
Brad
That's a really great point. Yeah. Anytime I hear the word trading, it just kind of gets my spidey sense up. It's. We in the FI community are not looking to trade. We're looking to invest over decades. So, yeah, if platform is saying trading is what sets them apart and a lot of this gamification and gambling style behavior, I think you probably should look elsewhere. There are plenty of other platforms. But yeah, are you going to go wrong at Robinhood? I really don't think so. As long as you're diligent about not getting sucked into that. So, yeah, thanks for the question, Kyle.
- [70:34]
Alan Donegan
Oh, it'd be really cool to gamify it to incentivize you to do the things that we think would be the. The right behavior supposedly of like, okay, run streak. You have been invested for this long and you haven't sold.
- [70:47]
Katie Donegan
You haven't done anything.
- [70:49]
Alan Donegan
You're on your way to FI and you've just left it be run streak. 371 days. It'll be quite boring, though.
- [70:56]
Katie Donegan
It would be amazing. 371 days of doing nothing. Celebrate and go back to doing nothing.
- [71:01]
Brad
That would be cool. Sit on your hands and do nothing. That really incredibly, that is the investing strategy that works the best. It's kind of wild. All right, well, as always with our. Our fun conversations, we could literally do this for three hours. But for the sake of Andrew, our editor, we'll. We'll wrap it up here and maybe we'll. We'll. We'll do another one real soon because this is a blast. Let's finish off with something fun. So every so often in my newsletter, I put a section I call what I'm reading, watching and playing. And I'm curious to you two, does anything jump out? Like, what do you and I know you are traveling, you're in Brazil. You're always up to different projects and things, so maybe that even gets included in some of these. But like, anything jump out for reading, watching, playing, anything that has Been interesting, you guys.
- [71:48]
Alan Donegan
Recently, we saw the latest Superman movie, and it was excellent. I very much.
- [71:53]
Katie Donegan
Yeah, James Gunn's Superman was fantastic. We've been enjoying going to the cinema. There's, like, the big imax, the big experience, the big screen, the sound. We've absolutely loved going to the cinema.
- [72:06]
Alan Donegan
We just make sure that the subtitles, rather than it being dubbed.
- [72:11]
Brad
Oh, yeah.
- [72:13]
Alan Donegan
Understand Portuguese. Yeah.
- [72:15]
Katie Donegan
This is not a problem anyone in America will have.
- [72:17]
Brad
I assume that's cool. Okay, so that's watching, I guess, for me. I've been watching recently. My. My favorite show. My favorite TV show of all time is the West Wing, and it's incredible. It came out in. I think the first season was 1999, so it's more than a quarter century at this point, but it still holds up. I went back. I've gone back to the beginning, watching the first season, and I think I'm eight or nine episodes in, and it's just wonderful. It's. I'm so. I'm so sappy when it comes to stuff like this. Like, I cry more at the West Wing than virtually anything else on Earth. And, like, I just find it so beautiful and, like, how the world can be, how government can be, how effective we can be when we come together. I just. I really like that show. So. So, yeah, I've picked that up very recently.
- [73:03]
Katie Donegan
I would add one more that we absolutely binge watched, which was called Paradise. It's on the Disney Star Service, and I won't give it all away, but it's like a protection agent for the president. And the story was just gripping. And then I think it was. The penultimate episode was one of the most emotional, harrowing episodes we'd ever seen. It was fantastic.
- [73:29]
Alan Donegan
Did I cry?
- [73:30]
Katie Donegan
Yes.
- [73:31]
Brad
Okay.
- [73:31]
Katie Donegan
Paradise is well worth watching.
- [73:33]
Alan Donegan
Paradise. Yeah.
- [73:34]
Katie Donegan
Huge twist. Really good.
- [73:36]
Brad
Okay, what streaming or where can you find that?
- [73:39]
Alan Donegan
We watch it on Disney, but it might be different.
- [73:41]
Katie Donegan
I think it's called Star or, like a Disney plus A side one.
- [73:46]
Brad
Okay. All right, well, yeah, we'll check that out. And, yeah, my. I. I have it on. Well, I'm not sure what it's called at the moment. HBO Max or whatever is where the West Wing streams in the US it might be Hulu.
- [73:56]
Katie Donegan
Hulu.
- [73:57]
Brad
Okay, cool. Well, check it out. Obviously, it is different everywhere. You guys are in Brazil right now, and you're. So we'll figure it out. Anything else? Have you guys played any games, Done anything fun like that?
- [74:08]
Katie Donegan
We're in the phase of running Rebel Finance Call. So we're running Rebel Finance Schools right now, which has turned into a huge project because we did opening episodes and we did bonus episodes. So it's actually turned into three months of every Monday and every Thursday running live streams. We've got 23,000 people from 48 countries on the course and we wake up thinking about how to serve them and how to help them and we get annoyed when we get tired because we can't keep going which is how you know that's the sign of you are living life on purpose is you're annoyed that you're tired and you just want to do more fun stuff that has been.
- [74:46]
Alan Donegan
Is that a long way all consuming, saying that we've not done much else.
- [74:51]
Katie Donegan
We run on the beach, we go swimming, we work on helping people with their finances and I will be excited to have a break afterwards. Oh, I believe my birthday is coming up and we are going to be in LA for my birthday. Living in Venice beach for a little while. So I think we're going to go to the Avengers campus at Disneyland for my birthday baby.
- [75:12]
Brad
Oh, that's cool. That sounds fun. When I come, as I said I might want to come. You know, I've never, I've never been to la, so. So hey, you never know. You never know.
- [75:22]
Alan Donegan
Never been to la.
- [75:23]
Brad
You bought there, I guess. No, never been. Never.
- [75:25]
Alan Donegan
That wonderful six pack up and down the beach.
- [75:27]
Katie Donegan
You can get day passes to the Muscle beach gym at Venice Beach. We looked it up yesterday. So we're thinking of getting like weekly or monthly passes to the Muscle beach gym and going and working out the beach in Venice Beach.
- [75:40]
Brad
Oh, that would be fun. I'll do that with you for sure. That'd be awesome. That'd be awesome. Okay. Okay. So to be continued on that. That sounds like fun. So okay, I'll. I'll wrap it up with just what I've been playing recently is. So the New York Times has an app for their New York Times games and I've been doing. I love the game Connections and it's Basically this like 4 by 4 grid of usually single words. So it's 16 words and you essentially have to group them into, into four different groups. So there's some connection. There's a tie that binds. It's a logic puzzle in essence. But it's really fun and it's surprisingly difficult. So yeah, it's just a fun game. So I branched out now a little bit. Every morning I do, I open my New York Times app. I do that. I got back into wordle after like many years. I, I just Started doing that recently and they have a little mini crossword puzzle and it's just like essentially how fast can you finish it? So it's usually a two or three minute exercise. And yeah, even every so often I do sudoku, lots of logic puzzles for me. So been doing that.
- [76:43]
Alan Donegan
Can you do cryptic crosswords or are you doing the non cryptic version?
- [76:48]
Brad
Ooh, I'm doing just the regular. This is just like a regular crossword but they call it the mini. So it's usually, it's usually somewhere in the order of like 10 different clues. So it's really, really quick. So yeah, just kind of a fun thing. I think if you. Then this is just the free version. If you subscribed you can get a bunch more. But yeah, that's my little fun every morning. And I started playing a new board game with my daughters called I think it's called Skull King and it's, it's a card game. It's a trick taking game that is really fun. It only takes maybe 20, 30 minutes. It's similar to a lot. If you're familiar with trick taking games like spades or hearts or Euchre or something like that, you'll understand the basic mechanics. And it's like 10 rounds. So you have, you start with, you each have one card the first round, then two cards the second round, three cards the third and you have to basically bet how many tricks you think you're going to win. So it increases in complexity as you go through the game because then more cards are out so it changes and then you're always playing off the other people. And then I guess in this game, the Skull King, there are something like a handful of additional cards that are just like these extra bonus cards that add again a further little wrinkle or complexity. So it's one of the most fun games, new games that I played in a long while and I think it's cheap. It's like the one of those Grandpa Beck games that they have another game that I like called cover your assets which is a fun one. It's a little money related but not so much but another fun like 10 or 15 minute game for people to check out. But yeah, I like it. I feel like it's maybe 15 bucks to buy this game thereabouts. And yeah, I would suggest it. So that is what I've been up to, my friends.
- [78:26]
Katie Donegan
That sounds fun. It's a beautiful way to start the day and we love a good game. Bring the card game next time we hang out.
- [78:32]
Brad
Sounds good. We will Enjoy that. It really is fun. It's a good one. So. All right, so everyone, thanks for being part of this conversation. This really is something that maybe it's a little more formal than Alan, Katie and I usually do, but it's not all that dissimilar to some of the things. And yeah, I guess I got a little, little riled up in there, but all in good fun. And my friends, thank you for being here, as always. So you're doing Rebel Finance School right now. I'm assuming by the time this goes live, that'll either be over, just about over. But if people want to find you, where's your, like, your main website? Where can they find Rebel Finance School either to watch replays or sign up for next year?
- [79:09]
Alan Donegan
Yeah, well, Rebel Finance School is going to be going until mid to late August, so come along and join in on the fun. And we leave the videos up for a good few months afterwards. So if it's not up, then you can just sign up for next year.
- [79:24]
Katie Donegan
And the best place to find about us and what we're up to is rebeldonigans.com that's where you can find us. That's where all our stuff is. All our latest thinking articles and blog stuff. Or obviously, we just love coming back on Brad's podcast and we're the biggest fans of Choose Fi ever.
- [79:40]
Brad
Thank you, guys. Yeah, and we're going to do a lot more of these. This is a lot of fun. So, yeah, hopefully every couple months we'll jump on and just do a fun little episode. So, yeah, this is great. Thank you as always, for being here and to everybody who's listening. Like we talked about, a lot of this comes down to just thinking clearly, just updating your thinking, looking at the world as it is, not how somebody told you it was or how you want it to be. And things change. And that's a beautiful part about being human. I think that to me was the through line of the episode and I thought this was fun. I hope you enjoyed it. And until next time, thanks for listening to Choose Upfi.
- [80:15]
Alan Donegan
Thanks.