Can We Reach Financial Independence?

Summary

Podcast Summary: Can We Reach Financial Independence?

Podcast Information

• Title: Jill on Money with Jill Schlesinger
• Host/Author: Audacy
• Episode: Can We Reach Financial Independence?
• Release Date: April 4, 2025

Introduction In the April 4th episode of "Jill on Money with Jill Schlesinger," host Jill Schlesinger, CFP®, along with co-host Mark Dalersio, delves into the intricacies of achieving financial independence. The episode features a detailed conversation with Brad and Janet from Michigan, who are navigating significant financial transitions post-military service. This summary captures the essence of their discussion, highlighting key financial strategies, personal insights, and actionable advice for listeners aiming to reach financial independence.

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Guest Introduction: Brad and Janet's Financial Landscape Brad and Janet, both in their early fifties, retired from the military and have successfully transitioned into the civilian sector with high-income careers. Their primary concerns revolve around managing their newfound wealth and setting targets for financial independence.

• Monthly Income:

  • Janet: $5,000 from military pension
  • Brad: $11,000 from VA benefits and military retirement
  • Total Pension Income: $16,000/month

• Civilian Income:

  • Janet: $200,000/year
  • Brad: $250,000/year from his practice as a rheumatologist

Brad expresses his concern:

“We just want to understand what our choices are. We haven't been wealthy, and now we're facing substantial wealth potential, and I just don't want to screw it up.”
— Brad (04:44)

Financial Assets and Investments

• Retirement Savings:

  • Combined 401(k): ~$1.5 million
  • Traditional IRA: ~$100,000

• Brokerage Account: $100,000

• Savings: $50,000 in the bank

• Real Estate Holdings:

  • Primary Home: Valued at ~$700,000 with a $380,000 mortgage at 2.5% interest
  • Rental Property: Valued at ~$650,000 with a $325,000 mortgage at 2.25% interest, generating ~$3,200/month after expenses

Brad highlights their financial prudence:

“We paid off every single bill we had. So we had nothing other than mortgages.”
— Brad (11:02)

Spending and Cash Flow Management Brad and Janet have a substantial cash flow due to their high incomes and rental property.

• Monthly Expenses:
  • Essential Bills: < $10,000
  • Additional Expenses: ~$20,000 (supporting parents and adult daughter)
  • Total Estimated Expenses: ~$35,000/month

Mark underscores the importance of balancing high income with disciplined savings:

“The key to this whole scenario is, there’s a lot of money coming in from a lot of different directions. You just got to make sure you capture it.”
— Mark Dalersio (16:03)

Advice and Strategies for Financial Independence Mark and Jill provide comprehensive advice to Brad and Janet on optimizing their financial trajectory towards independence.

1. Maximizing Brokerage Accounts:

   • Strategy: Allocate excess income directly into brokerage accounts to harness the power of compound interest.
   • Recommendation: "Capture your extra cash flow now so that in five or ten years, you have no financial pressure.”
     — Mark Dalersio (16:21)

2. Diversification and Investments:

   • Approach: Focus on index funds and other diversified investment vehicles within brokerage accounts.
   • Advice: “Put it in the brokerage account, get those index funds working. Doesn’t matter what the market’s doing.”
     — Mark Dalersio (17:02)

3. Estate Planning:

   • Consideration: Revisit estate documents to accommodate growing wealth and ensure proper asset distribution.
   • Insight: “As you make more and more money, the estate situation could become more complicated.”
     — Mark Dalersio (17:02)

4. Cash Flow Management:

   • Emphasis: Maintain a clear understanding of monthly cash flows and ensure that funds are systematically allocated towards investments.
   • Guidance: “I want to make sure you guys are capturing this money. Be methodical, put it away, and enjoy your lives.”
     — Mark Dalersio (14:35)

Notable Quotes with Timestamps

• Brad on Transitioning Wealth:

  “It's a lot of income. It's not a lot of wealth.”
  — Mark Dalersio (09:45)

• Mark on Capturing Excess Funds:

  “What you have to do is capture your extra cash flow now so that you can really feel like in five or ten years, you have no pressure.”
  — Mark Dalersio (16:21)

• Brad on Financial Security:

  “We’re making this much money, do you have a sense of how much you’re really spending?”
  — Mark Dalersio (11:49)

Conclusions and Takeaways Brad and Janet are in an enviable financial position, with multiple income streams and significant savings. However, their primary challenge lies in effectively managing and investing their high income to ensure long-term financial independence.

Key Lessons:

1. Disciplined Savings: Regardless of income level, systematically saving and investing excess funds is crucial.
2. Diversification: Spread investments across different vehicles to mitigate risks and enhance returns.
3. Estate Planning: Regularly update estate plans to reflect changing financial circumstances.
4. Professional Guidance: Leveraging expert advice can help navigate complex financial landscapes and optimize wealth management.

Final Thoughts Mark and Jill commend Brad and Janet for their financial discipline and proactive approach to wealth management. They encourage listeners to adopt a similar strategy of capturing and investing excess income to pave the way towards financial independence.

“Change your work, change your wealth, change your life.”
— Jill Schlesinger (19:21)

Closing Remarks The episode concludes with Jill and Mark reiterating their commitment to helping listeners make informed financial decisions. They invite audience members facing significant life changes or financial uncertainties to reach out via their website for personalized advice and support.

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Conclusion "Can We Reach Financial Independence?" serves as an insightful guide for individuals navigating substantial financial growth and aiming for long-term security. Through the real-life example of Brad and Janet, listeners gain practical strategies and motivational insights to effectively manage their finances and achieve financial independence.

Transcript

[Jill Schlesinger]

Hey gang, if you're freaking out about.

[Mark Dalersio]

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[Jill Schlesinger]

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[Mark Dalersio]

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[Alex Asulin]

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[Mark Dalersio]

Welcome to the Jill on Money show. It's Friday, April 4th and we are here trying to help you make better financial decisions, maybe more considered decisions. And what I mean by that is each of us has something going on in our lives that touches our money. And when you are wondering which direction to go towards, maybe you've got seems like a binary choice. This or this. Sometimes there is another choice. Maybe there are many ways to get where you want to go and you just want to understand what your choices are. If that's you, we'd love for you to get in touch with us. Go to our website jillonmoney.com click the contact us button, which is in the upper right hand corner. Write us a note and if you'd like to join us live on the program, check the box and Mark will do everything else. Now while you are on the website, sign up for the free weekly newsletter and check out Jill on Money Live. This is a subscription service going to cost you 45 bucks for the next 12 months. That's it. And for that $45 investment, you have access to quarterly live webinars. Mark and I are still trying to figure out who we want next. We have two different choices. You get the bonus audio and video content that lives behind the paywall, the back catalog, the again, all for 45 bucks for the next 12 months. I think it's well worth it. Okay, check that out. Everything lives at Jill on Money and you should bookmark it. Today we are talking to Brad and Janet. They are from Michigan. So what's happening? What can we do for you?

[Brad]

I have some questions about what to do with our future and I'm trying to figure out what our money target should be.

[Mark Dalersio]

Okay, that sounds like a very big question, like what to do with our future. I feel quite responsible, guys. Okay, so let.

[Jill Schlesinger]

Can you set it up for me.

[Mark Dalersio]

A little bit more? So first, are we talking about your future retirement? Are you talking about something else?

[Brad]

I think really our future retirement. We both have high income jobs and it's a relatively new experience because we both are retired from the military. So we have kind of an annuity coming in from VA and retirement benefits. And I realized both of us have, as we've transitioned from our government service to civilian sector, that we make a lot more income. And I've realized now that I like to spend money on some other things that I haven't done. And it's created kind of a. I don't know, we talk about this at home. Like just we've kind of broken through a glass ceiling. None of our parents were wealthy. We grew up very, you know, humble beginnings. And now we have all this wealth, potential wealth and I just not sure what our number. I don't want to screw it up.

[Mark Dalersio]

Okay, that makes sense to me. So, so let's talk about this. So you're both retired from the military. So Janet, what is your pension amount from the military? 5,000. 5,000amonth. Okay. And what about you, Brad? What's yours?

[Brad]

I'm closer. Between VA benefits and military retirement, around $11,000 a month.

[Mark Dalersio]

Wow. So 16 grand a month coming in. And do you have health coverage or any other benefits through the military and va?

[Brad]

Yes.

[Mark Dalersio]

Okay, so that's all set.

[Brad]

Yep.

[Mark Dalersio]

And so, you know, many people might say 16 grand a month. What more could you possibly need? But you also have secondary second careers, so what are you earning in your. Your next. Your. Your civilian life?

[Brad]

I have been lucky enough to be able to buy into a retired practice. So I'm a rheumatologist, and it looks like I'm pretty set on a 5 to $600,000 income for the next. However often I want to do this.

[Mark Dalersio]

Oh, my gosh. Wow.

[Jill Schlesinger]

Wow.

[Mark Dalersio]

That's huge. Okay. Janet, are you a physician as well? I am not. I'm in business. Okay. And what about your civilian salary? 200. Wow, you guys are just killing it in salary wise. Do you have 17 kids or. Not that many. We have three kids. Okay.

[Brad]

We have two kids. She considers me a child, too.

[Mark Dalersio]

Oh, I love that so much. That was perhaps one of the best responses.

[Jill Schlesinger]

Two kids.

[Mark Dalersio]

How old are they?

[Brad]

20 and 16.

[Mark Dalersio]

Okay. Is 20 in college?

[Brad]

Yes.

[Mark Dalersio]

Okay. And how is that being paid for? Is that a GI Bill thing or something else?

[Brad]

I'm. I'm paying it directly. She goes to a state school, very inexpensive. I also pay her living expenses. She's a third year, and so I end up, you know, she's in an apartment off campus and fully, fully dependent on us.

[Mark Dalersio]

Okay.

[Brad]

Probably. Probably over the course of the next four years, we're planning on kind of covering her living expenses even when she's done with college for a while.

[Mark Dalersio]

Okay, fair enough. And the 16 year old's in high school? Yes, he is correct. Yeah. Okay. And have you saved money for College for the 16 year old or not?

[Brad]

Not so much.

[Mark Dalersio]

Okay. Okay, I hear you. So you got tons of cash flow. Why don't you tell us a little bit about the amount of money you have saved already?

[Brad]

Between my wife And I, our 401k, we've got about a million and a half between the two of us in our 401ks.

[Mark Dalersio]

Great.

[Brad]

And then I. I don't know why I never did this, but we. We didn't really start putting money into a Roth or a traditional IRA until just recently. So we both have about, you know, probably split between the two of us just shy of $100,000 in kind of a traditional IRA brokerage that I started doing once I became a civilian.

[Mark Dalersio]

But no Roth assets?

[Brad]

No.

[Mark Dalersio]

Okay, got it. What about a brokerage account? Just a plain old taxable account. Do you have anything in there?

[Brad]

Yeah, about $100,000.

[Mark Dalersio]

Okay. And money in the bank, about 50 grand. And how about a home? Do you own a home?

[Brad]

We own two homes. We own. And both. Well, we don't own it. The bank owns it.

[Mark Dalersio]

Okay.

[Brad]

We have a mortgage at our primary home, and then the first home we ever had, which was in the D.C. area when we were stationed there, we still own and rent.

[Mark Dalersio]

Okay, what's the rental property worth?

[Brad]

Probably about $650,000.

[Mark Dalersio]

Is there a mortgage outstanding on that?

[Brad]

About $325,000 mortgage.

[Mark Dalersio]

Okay. And is it an affordable mortgage? What's the actual interest rate?

[Brad]

2.25%.

[Jill Schlesinger]

That would be affordable.

[Mark Dalersio]

All right. Okay. And it's cash flowing, like you got to rent it. And I mean, you don't live there, so do you pay a property manager? Is that how you deal with it?

[Brad]

We do. And it generates about $3,200 a month in rent to us after the fees and everything are paid.

[Mark Dalersio]

Okay, that's great. All right. And your primary, how much is that worth?

[Brad]

Probably about 650 or $700,000.

[Mark Dalersio]

Okay. And is there a mortgage on that home?

[Brad]

There Is, and it's $380,000.

[Mark Dalersio]

Okay. Same low interest rate or something more?

[Brad]

2.5%.

[Jill Schlesinger]

Oh, gosh.

[Mark Dalersio]

Okay. All right. How long have you guys been making this much money? I mean, this is a ton of money.

[Brad]

This much money for one year. And it's basically about half of this before. Before this year. That's what's caused me to kind of have this pause of like, oh, my God, this is a lot of wealth.

[Mark Dalersio]

Yeah, well, it's a lot of income. It's not a lot of wealth.

[Brad]

Not a lot of wealth.

[Mark Dalersio]

We're going to try to make it some. We're going to try to get you to be wealthier. How old are both of you?

[Brad]

I'm 53 and my wife is 52.

[Mark Dalersio]

How long do you want to keep working this hard?

[Brad]

That's debatable. I honestly don't necessarily know if I ever need to stop working. I wanted to get to the point where I am not accountable to have to work, though. Maybe by 60. Maybe by 60 or 65.

[Mark Dalersio]

Okay. But that's perfectly. I mean, just to throw, you know, just a marker. Right. So here is a question for you. When you say, like, oh, my God, we've been having fun, right? You're spending some money. Go back to last year for a second. Last year, Janet, were you making that 200,000 last year? Yes. Okay, so if we go to last year and it's like you're making 200 for Janet and then maybe 250 for Brad, and then, you know, this 880 grand in pensions, that's A lot of money. Did you spend a lot of it?

[Jill Schlesinger]

Did you save a lot of it?

[Mark Dalersio]

Like what happened in that year when you were making all that money?

[Brad]

Yeah, a lot.

[Janet]

Yeah, a lot.

[Mark Dalersio]

Yeah, we spent a lot. Jill, thanks a lot.

[Brad]

Well, we paid off every single bill we had. So we had nothing other than mortgages. We had a travel trailer that we had bought while we were in the military, and I kind of paid a little bit off on that. So basically we just paid all our bills off.

[Mark Dalersio]

So what you basically did was you cleaned up your balance sheet so that all that really remains are these low interest mortgages, and now you've got all this cash flow and do you guys have some money that's just, you know, like when you get a sense of this. Now that you're making this much money, do you have a sense of how much you're really spending? I mean, I know you've gone a little crazy, but I'm not saying like those things like a car and cleaning that but like your actual expenses of, you know, here's what it costs to live and here's how our travel budget and life's really good. Do you know what that number is?

[Brad]

Yeah, I think that, that I like our bills wise, it's. It's less than $10,000 a month.

[Mark Dalersio]

Let's say I called it 10,000amonth.

[Brad]

Yeah. And. And our. And then everything after that is just either things that I'm. Because I. Both of my parents are not wealthy, so I, I support them. I support my, my, like I said, my adult daughter right now. So over and above that of what my. Our personal needs are, we probably spend another $20,000 a month on top of that.

[Mark Dalersio]

So 30 grand a month for everybody? All in for everybody. You and family. Does that seem 30 grand a month seem like the right number?

[Brad]

You might want to say 35 grand.

[Mark Dalersio]

Wow. It's amazing how we've like ratcheted up. But yeah, the pension covers half of it. Well, I mean, the 35 grand a month is scary as a number, but it's not scary with everything else you have. Right. So as Mark just said, pension covers half of that. You're. I mean, really, if we go back to a year ago, that's perfect. I mean, you're like kind of on target in that you're making your 30. You spend your 35 grand a month, you're making like 650 all in here. Right. I'm not even cons. I am not even including rental income or anything like that. Okay. I'm Looking at it, you know, like when Janet has $200,000 of income, Brad, 250. And the pension, that's 650. You know, I know taxes are high, but they're not that high. And so that's a good chunk of money. You got it. But now you're even making more money. So here's the challenge that we have, and that is to capture the money, that extra money that you're now earning, and really start to jam on your brokerage account. That's what I would say. Forget about traditional IRA, even 401k, like, it's all fine and good. I want you guys to like, really get focused on what is the amount of money that we want going into that brokerage account every single month. My guess is that it would be like a no brainer to put ten grand a month into that account if you. I mean, I don't know, how do you receive your income that five or six hundred grand a year now, is it monthly or do you get a big wallop at the end of the year as a distribution?

[Brad]

It's a couple different things I pull about, just like you said. I allow myself to live off of 275 a year for me personally. Everything else, there's two bonuses that are set up twice a year, not inclusive of. There's some other things that are part of owning that I have set up. I have a real estate investment trust that I get 30 to $50,000 a year, distributes at the end, as well as maxing out like, I got it.

[Jill Schlesinger]

I get this all because like a.

[Mark Dalersio]

Professional company can do lots of different things. You can pay rent to yourself. I got all of that. I need you guys to start making sure that we capture this money. Do you manage your own money?

[Brad]

I do.

[Mark Dalersio]

Okay. Do you feel comfortable with that?

[Brad]

I do.

[Mark Dalersio]

Where's that brokerage account held?

[Brad]

Charles Schwab.

[Mark Dalersio]

Okay, great. I love Schwab. Excellent, Excellent. So I, I asked that only because I want to make sure you're not mucking around with something crazy, you know, with some, you know, expensive place. So what I think you should be doing is I think it is perfectly reasonable if you've got $275,000. Right. Plus the pension, plus your income. Janet put that all together. That pays that 30. That is your nut. That pays for your nut. Everything else that comes in, I want it in that brokerage account. I am not kidding around. I want it in the brokerage account. We just have to capture your money. All of this is to say that that you're in incredible shape. It's weird because I feel like you are sort of like a little bit worried that you're spending so much money, but you really know you're okay. You know, 35 grand a month is not forever. This kid is going to grow up. You'll have a second one. Who knows what happens? Your parents, they are not going to be supported forever. And even if you said, well, we just like our lifestyle, I find it hard to believe that the two of you could be spending on your own 35 grand a month. The. There's no way that's happening. It's just not.

[Brad]

We don't. It all goes to everyone else.

[Mark Dalersio]

All right, so you're helping everybody. You're good kids, Very nice. But I think we have to capture this extra cash flow now so that you can really feel like in. I don't know, in five or 10 years, you say to yourself, I have no pressure.

[Jill Schlesinger]

Zero.

[Mark Dalersio]

I can just, like, sit back. I can work half time, keep doing my job. I like it. I don't have to make so much money. And, Janet, if you're feeling like. You know what? I kind of hate my. Like, a new boss comes in, oh, I hate that person. I'm out of here. Like, you're going to have options. You should not feel tied to these jobs, but while you have them, capture the money. Absolutely.

[Brad]

Well, thank you.

[Mark Dalersio]

How do you feel about that? It's pretty good, right?

[Brad]

Yeah. I like the idea of. I think that I had. I developed this brokerage account with the idea that I needed put more kind of into it and start to develop this. I'm not entirely sure what that looks like as far as a monetary, like, goal.

[Mark Dalersio]

Mark, do you think that ten grand a month or. Or even just to think of into these two chunks, 50, 60 grand to go into the. Into the brokerage account. Do you think that's reasonable, Mark? Very reasonable. I mean, that's the key to this whole. This whole scenario is, you know, there's a lot of money coming in from a lot of different directions. You just got to make sure you capture it. And if you do that and you get really serious about it, not maniacal. Like, it doesn't mean you have to watch what you're spending. It just means when those chunks of money come in, put them into the brokerage account, get those index funds working. Doesn't matter what the market's doing. You have it, you put it in, boom, you're done. You don't look back. So I think you guys are in such good shape. Again, let's capture the money, be methodical, put it away, enjoy your lives and, you know, keep going. And I presume because you come from the military, you have some of those important documents that are done, like your estate documents are done. But as you make more and more money, I think what you might find is the estate situation could become more complicated. Meaning that, you know, you've got young kids, you guys are going to be making a lot of money. You know, you may want to just revisit your estate documents. Okay.

[Brad]

Okay.

[Mark Dalersio]

And I think that's it. I think you're in great shape. Any other questions for us?

[Brad]

No, we really appreciate your time.

[Mark Dalersio]

Oh, my God. This is amazing. What a story, Mark. What a story. I love these people who transition from the military. My goodness. Incredible, incredible upside for these folks. Brad and Janet, if you have any other life lessons for all of us to learn, it may just be just follow their path. It's amazing. So if you've got a big change, it doesn't have to be that you're making so much more money. Maybe you're making less money money. Maybe something's changed in your life where you're choosing between different jobs. Maybe you're worried about losing your job. Maybe you want to try to protect you and your family. Get in touch with us. Go to jillonmoney.com, click the contact us button. Write us a note. If you want to join us on the air live. Check the box. Mark. We'll do everything else you can subscribe to us on the Odyssey app or wherever you find your favorite podcasts. Please leave us a rating and review wherever you listen. Hey, it's Friday. Time for some business. Our music is composed by Joel Goodman. Mark Dalersio is the executive producer and king of all things web. And we are distributed by the fine folks at Odyssey. Try to do something nice for someone else today. It will make you feel better and it's going to make them feel better. Change your work, change your wealth, change your life. Thanks for listening. We'll talk to you on Monday.

[Jill Schlesinger]

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[Janet]

Rules, but where's the fun in that? I'm Soraya, and this is Rule breakers, the podcast where we celebrate the rebels, the misfits, and the ones who make their own way. Every week, I sit down with the biggest rule breakers in sports, entertainment and beyond to talk about the wildest moments, toughest lessons, and why breaking the rules might just be the key to success. Follow and listen to Rule breakers with Soraya, an Odyssey podcast, available now for free on the Odysee app and wherever you get your podcasts.