How to Save Your First $25,000 -- The Roadmap Most People Get Wrong (SB1838)

Summary

Podcast Summary: The Stacking Benjamins Show

Episode: How to Save Your First $25,000 – The Roadmap Most People Get Wrong (SB1838)

Release Date: May 6, 2026
Hosts: Joe Saul-Sehy & Josh “OG” Bannerman, CFP
Featured Guest: Scott Trench (BiggerPockets, Author of "Set for Life")

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Episode Overview

This episode tackles one of the toughest but most transformative financial milestones: how to save your first $25,000. Joe, OG, and guest Scott Trench challenge conventional wisdom about frugality and investing, focusing on big decisions rather than penny-pinching. They also dig into headlines about financial advisors and 401(k) lawsuits, answer thoughtful listener questions, and offer actionable tips to help listeners break through early savings barriers.

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Key Discussion Points & Insights

The Real Challenge: Saving the First $25,000

• Main Theme: Building the first $25,000 in savings is daunting but game-changing—after you gain momentum, everything shifts.
• Joe Saul-Sehy (03:56):
  “Once you’ve got momentum ... everything begins to change, but before that, it can totally feel like you’re stuck.”
• Scott Trench shares his own journey and practical strategies from his book "Set for Life."

Headline Segment: Bad Financial Advice & Lawsuits

• Topic 1: Can You Trust Your Financial Advisor?

  • Referencing a Bloomberg article on bad actors in financial advising.
  • Joe & OG debate the media’s portrayal of financial misdeeds and personal responsibility.
  • Joe (09:59):
    “The problem is as much hers as it is the advisors ... You don’t tell a football player not to have a coach.”
  • OG (11:14):
    “To generalize ... and say, every advisor’s a crook ... bad news, good copy.”
  • Major takeaway: Do your homework—use tools like FINRA BrokerCheck, ask questions, seek referrals.
    Joe (13:34): “Shame on you if you hand your money to another human being and say, ‘Hey, I’m going to put the blinders on.'"

• Topic 2: 401(k) Lawsuits Over Fund Choices

  • Discussing lawsuits against Capital Group/American Funds for allegedly self-dealing expensive proprietary funds.
  • OG defends the long-term track record and governance of American Funds.
  • Both recognize that “bad apples” exist, but blanket distrust hurts consumers.

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Scott Trench’s Step-by-Step Roadmap to $25,000

1. Focus on Big Expenses, Not Cutting Out Coffee (22:21–24:42)

• Scott Trench:
  “The three biggest parts of the average American’s budget are housing expenses, commuting expenses, and food ... if you’re cutting lattes, you’re doing it wrong.”
• Key Point: Concentrate on housing, transportation, and food for major savings impact, not “latte factor” items.

2. Frugality as a Stepping Stone, Not the Only Solution (23:22)

• Frugality empowers accumulation and builds respect for money.
• Efficiency in daily habits leads to better opportunities and wealth-building.

3. Lifestyle Design & Changing Habits (26:18–27:40)

• Biggest hurdle: Overcoming entrenched spending habits and adjusting the “big 3” costs.
• Making hard choices like moving or house hacking yields tremendous savings.

4. Why $25,000? (28:50)

• $25K represents one year of runway for a lean, efficient millennial lifestyle (~$2,000/month spent).
• Enables risk-taking and provides safety net for life and career choices.

5. Where to Save/Invest the First $25K (29:42–32:33)

• Keep $2–$5K in cash for emergencies.

• Invest above that in index funds—even if market declines, long-term returns justify risk for young savers.

• Real estate enters the equation after building the first $25K, via “house hacking”—buying a duplex, renting half, and living for free.

  • Scott Trench (33:00):
    “Once you accumulate that first $25,000, this option called house hacking presents itself … a huge lever accessible to median income earners.”
  • His example: Put $12,000 down on a $240,000 duplex, rent half, cover mortgage, eliminate housing expense.

6. Do-It-Yourself or Hire Out? (35:09)

• When your time is worth less, do as much yourself as possible to save money and learn.
• Scott Trench: Early experience in DIY led to confidence and cost savings when hiring later.

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Scott’s Rapid Fire Tips for Early Savers (37:28–40:55)

• Save $1,000 before earning $1,000: Saving is tax-free; spending less creates more “runway.”
• Spend more on fun, less on housing/transportation/food: Prioritize experiences, not fixed expenses.
• Student loans rarely worth it for early financial freedom seekers—advanced degrees can delay wealth.
• Don’t buy an expensive home/condo early, especially in a trendy area—slows path to financial independence.
• Stocks “less risky” than bonds for long-term wealth (when young).
• Be a “jack of all trades”—adaptability in careers is safer than hyper-specialization in today’s fast-changing economy.
• Contribute less to retirement accounts than conventional advice—keep investments accessible in taxable accounts for early financial independence.

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Listener Q&A Highlights

1. International Investing Performance (45:57–51:15)

• Question: Why keep international stocks when they’ve underperformed U.S. for decades?
• OG’s Insight: International/emerging markets provide diversification (“zig when others zag”), help rebalance portfolios, and offer long-term opportunity.
• Past underperformance may signal upcoming mean reversion; international allocation depends on risk tolerance and goals.

2. Using IRA Money for a Home Down Payment (52:11–55:40)

• Q: Should I pull from my IRA to buy a first home and avoid PMI?
• A: Strongly discouraged—the taxes and lost compounding outweigh “savings” from avoiding PMI.
• Short-term plans (e.g., using an imminent bonus) are risky; better to find other ways or delay until cash is in hand.

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Notable Quotes & Memorable Moments

• On Picking Advisors:
  “You don’t tell a football player not to have a coach…hire great people in your corner.” – Joe (09:59)
• On DIY Real Estate Repairs:
  “I was a wuss…every time I wanted to do a repair, I’d have to go to Home Depot and come back.” – Scott (36:14)
• On House Hacking:
  “I was collecting about $150 per month—completely eliminated my cash outflow for housing.” – Scott (33:00)
• On International Investing:
  “International and emerging markets zig when other things zag.” – OG (46:49)
• On Saving vs. Earning:
  “When you earn $1,000, you’re only going to keep about $666 of that. If you save $1,000, all of that is after-tax.” – Scott (37:43)
• On Career Risk:
  “Your value is not in your ability to operate a specific software…Your value is in your ability to learn quickly and produce value.” – Scott (39:16)

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Episode Structure & Timestamps

• 05:58 – Headline Segment: Bad financial advisors, lawsuits, and personal accountability.
• 20:00 – Introduction of Scott Trench from BiggerPockets.
• 22:21–32:33 – Main interview: Scott’s roadmap to saving first $25K (big expenses, frugality, lifestyle changes).
• 33:00 – House hacking and leveraging savings for real estate.
• 37:28–40:55 – Rapid-fire foundational money tips with Scott.
• 45:57–51:15 – Listener Q: International investing returns.
• 52:11–55:40 – Listener Q: Using IRA for a home down payment.
• 61:47 – End & light banter/after show (non-content, podcast humor review).

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Takeaways & Action Steps

• Tackle housing, transportation, and food costs first—major wins come from big decisions, not small sacrifices.
• Respect your savings: start with building a year’s runway for flexibility and peace of mind.
• Don’t be afraid to invest in yourself (learning DIY skills) and creative money-saving strategies (like house hacking).
• Diversification matters: international investing can reduce risk, even with spotty past performance.
• Avoid short-term “fixes” like raiding retirement accounts for a home—in the long run you lose.

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Resources

• Scott Trench’s book: Set for Life
• FINRA BrokerCheck: https://brokercheck.finra.org/
• The Stacking Benjamins Facebook Group: Click here
• Newsletter/Show Notes: stackingbenjamins.com/201

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This episode is lively, occasionally ranty, and packed with straight-talk about the real levers that move the savings needle. Listeners seeking clear steps to get “unstuck” on their financial journey will find Scott’s practical, big-picture advice refreshing and actionable.

Transcript

[Joe Salsi]

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[OG]

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[Joe Salsi]

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[OG]

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[Joe Salsi]

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[OG]

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[Joe Salsi]

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[OG]

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[Joe Salsi]

to win it, win with Shopify. Start your free trial [e-mail] win. Well hey there stacker. Today we're talking about one of the hardest things in personal finance. Not investing, not retirement, not even figuring out what the heck the Fed's doing this week. Just getting your first real pile of money saved. That first 25,000 bucks. Because once you've got momentum, you already know if you're somebody who's done this, everything begins to change. But before that, it can totally feel like you're stuck. Like no matter how hard you try, something keeps pulling you back. There's always, always another frustrating thing that happens as you try to get it rolling. But man, when it does, it's so, so good. So today we're diving into a roadmap that challenges a lot of the advice you usually hear. Why cutting small expenses isn't your biggest wins come from a handful of big decisions. And while, quote, I'll save more when I make more is probably something that's holding you back. So we're also going to hit a couple headlines that might get a little, let's say, animated about financial advice and who, who should you actually trust with your money? A topic that I think is important for every stacker who's trying to grow their team. Put the right people on it. And here's the part that surprised me coming back to this episode, which is this conversation originally happen happened years ago. We just pulled up from the vault for Greatest Hits week. And you know why? Because even though you're going to hear a few references that are clearly from another moment in time, markets, news, maybe even a take or two, that feels like a throwback. Here's the thing, these core ideas, I'd love to get your take, but for me, the reason I wanted this one is because it holds up better now. Because today I feel like saving that first 25, 000 bucks actually feels harder than it did when we produced it. Of course, it always feels harder, but cost higher, decisions feel riskier, and it's easier than ever because of all those things. To feel stuck more before you even get started. And that's exactly why this conversation matters. So, as you listen, I'd love for you to ask yourself, if I actually nailed that first 25,000 bucks, what would change? So let's get into it. First of all, we've got a couple sponsors who help us keep on keeping on. And the first one I even have running in the background as I record and I work today. And it is. It's so amazing. I didn't even know this company existed until we started discussions about them sponsoring our podcast. And now I can't get enough of granola. And let me tell you how granola works. If you've ever been in back to back meetings all day, you already know the struggle that I'm about to explain. You're not along, you're contributing, you're trying to stay present, but in the back of your mind, you're secretly stress scrolling your memory for what was just said or who's supposed to follow up. Meetings are a mess. And granola fixes that. If you've ever left a meeting thinking that was productive and then 10 minutes later, you're seriously like, I can't remember what we even decided. Granola fixes that. It is so amazing. I use it for every single meeting I have. So how does it work? Well, granola is an AI powered notepad built for the way real people actually meet. You take rough notes like you normally would, and in the background, Granola securely transcribes the meeting. In fact, halfway during a meeting, I've learned I can even ask granola questions like, hey, what was just said 3 minutes ago on this one topic that I totally missed or I wanted to recall. And during the meeting, it'll tell me exactly what was just said. And at the same time, it continues transcribing. And the best part, it all works through your device's audio, which means it integrates seamlessly into whatever video conferencing tool you use. There's no setup. There isn't any awkward bot. It's just your normal meetings. But with superpowers, you get to actually listen instead of frantically typing every word and still walk away knowing exactly what was decided, who's doing what, and what comes next. I absolutely love it if you couldn't tell. In fact, when I first tried it, I thought, do I really need my meetings transcribed? The answer is yes, especially because it's so good at organization. It is amazing. We use it consistently to keep our team on track here at Stacking Benjamin's and I think it'll do miracles for whatever business you're in. So if meetings are eating up your day, granola is a no brainer. You can try totally free by heading to Granola AI SB Go to Granola AI SB get your time back. Once again, you can try it for free at Granola AI SB all right, we have one more sponsor here and then a couple more in the middle of Doug's trivia. Halfway through today's show. And that's it. We'll hear from them. And then our episode featuring Scott Trench. And back in the old days, we had our headlines first and then the second half we had Scott. So I think you're going to enjoy the discussion about financial advisors and also Scott Trench. Here we go.

[OG]

They're dogs and they're playing poker.

[Doug]

Live from Joe's mom's half finished basement, it's the Stacking Benjamin show. Hey, everyone. I'm Joe's mom's neighbor, Doug. And today we're talking about saving your very first $25,000. I remember when I saved my first 25 grand. It was 1996 and I just signed my name on this paperwork that gave me 25k to go to college. Well, the joke was on them because I never went. Actually. Why does that Sallie Mae keep calling me saying she wants her money back?

[Joe Salsi]

That's weird.

[Doug]

Anyway, on today's show with an alternative way to save your first $25,000 from BiggerPockets, Scott Trench. Also in our headline segment, we'll talk about bad financial advisors. We'll also throw out the Haven lifeline to a lucky listener, answer some mail, and still have time for my amazing trivia. And here they are, two guys nearly ready for the primetime Joe and O

[Joe Salsi]

J J J J.

[Scott Trench]

Foreign.

[Joe Salsi]

Hey, hey, and happy Monday. I am Joe Salsi. Hi, Average Joe. Money on Twitter. And we're back. You found us. Welcome back to the Stacking Benjamin show. Across the table from me again, the one and only other guys, we call

[OG]

him OG it's always sunny in the basement on a Monday.

[Joe Salsi]

I always think it's funny that people think when I say we're sitting at a rickety card table, they think we're not. And then for people that are in the Stacking Benjamin's basement, which is our closed Facebook group, we Posted pictures and what were the lines? I think Scott said, oh my God, it is. It is a card table.

[OG]

It is a card table. Yeah.

[Joe Salsi]

And Roger Whitney said, because as you know, he was just here.

[OG]

Yeah, he was just here.

[Joe Salsi]

Yeah. Roger said and it's unstable. And you will say that too. That's an unstable. This is.

[OG]

Oh yeah, you should see the chair. The chair's all duct taped because you won't let us buy a new chair.

[Joe Salsi]

Don't you love how I always give you that one?

[OG]

Well, you know, yeah.

[Joe Salsi]

Good stuff. Speaking of good stuff, Scott Trench, I totally believe what he's here to talk about. First 25,000 OG that. That is man. Getting some money saved is the hardest thing.

[OG]

That is the hardest. Yes.

[Joe Salsi]

We're going to conquer that mountain in a second. But first we got some awesome headlines. So let's move.

[OG]

Hello darlings. And now it's time for your favorite part of the show.

[Scott Trench]

Our stacking Benjamin's headlines.

[Joe Salsi]

Boy 2 Boy Frustrating kick in the gut headlines today. This one comes to us from Bloomberg. Why you still can't trust your financial advisor. This is by Ben Steverman. Your new financial advisor is a well decorated office, a firm handshake and a bright smile. After an hour long meeting, you leave with what you think is a state of the art investment portfolio. You feel financially secure, taken care of. It's also possible you've made a huge mistake. A wave of research over the past few years has documented serious problems with how Americans get financial advice. Susan Schaefer, a 70 year old retiree in Narberth, Pennsylvania learned this the hard way when she hired and fired multiple advisors over two decades. One chose inappropriate investments including small cap stocks. Another put her into funds with huge backloaded fees.

[OG]

How are small cap stocks inappropriate? But go ahead.

[Joe Salsi]

The third promised to charge just 500 a year than stucker with thousands of dollars in commission costs. Oh boy, oh boy, boy did this make me angry.

[OG]

The article of that this happened to this woman or the article itself?

[Joe Salsi]

The article itself made me just livid because you know what?

[OG]

Here I was gonna say go ahead, you fire your salvo and then I got a good one.

[Joe Salsi]

Well, mine will be short. You know, people are gonna get out of this. Don't hire a financial advisor. Which the smartest people that I worked with were amazing people that could do it themselves. But you don't tell a football player not to have a coach. You don't tell a rock star not to have an agent, a management company. You don't tell smart people who are like A rocket. Making money at one thing to not have great people in their corner. This person's problem is the same. I don't know this woman that he's talking about in the article. I don't know her. I will tell you, based on my 16 years in the trenches, that the problem is as much hers as it is the advisors. It is every bit as much hers as it is the advisors.

[OG]

I'm going to take a little off the gas on that as far as totally laying the blame at her feet. Or 50, 50, because there are bad apples, right? And here's the problem that I had with the article. He didn't get to the spot yet, but I read it too. And the author wrote, quote, with an industry awash and misconduct, I don't think that that's terribly accurate. I mean, could we not say that medicine's awash in misconduct or law is awash in misconduct? Of course there's bad doctors and there's bad lawyers and there's bad financial professionals too. Bad bankers and bad police officers, for crying out loud. There's bad everything. But to generalize it right out the gate and say, every advisor's a crook. And to your point, under no circumstances should you ever hire an advisor because, for crying out loud, you're going to get ripped off with inappropriate investments like small cap stocks. They're the ones that produce the greatest return. How are they inappropriate?

[Joe Salsi]

I would read this article and I'd be afraid. I would be so afraid and I would do completely the wrong thing after I read this article. Because you can even go through this. You're like, oh, stocks and funds are bad, right? I mean, you could just. They don't say this in the article. That's just the next domino. It says some 38% of those misbehaving advisors later go on to hurt even more clients.

[OG]

So again, this is just a uselessness in statistics, right? So you read that the untrained ear or the untrained eye, when you read it or hear it, you just heard the word 38%. And did you just think to yourself, wow, 38% of the advisors are bad. That is a pretty big number.

[Scott Trench]

That's not what. That's not what it Sundays.

[OG]

It says 38% of the bad advisors go on. They go on to do what? Redo bad things is basically what they're saying. Yeah. Recidivism rates are very high in the financial services we talked about.

[Joe Salsi]

Do. Do your homework. If you're hiring any coach, to use my analogy from before, does a Football player, just go play for whatever team. I mean, don't get me wrong, they get drafted and they. You know what I mean?

[Scott Trench]

But.

[Joe Salsi]

But when they're choosing.

[OG]

But not in high school or not in college.

[Joe Salsi]

In college, right. They go to a college, they got to believe in the program. They decide that's where they're best. Right? They go tour the campus. They know everything about it. They know what the pluses, the minuses are of that particular program versus others. And you do that if you're hiring an agent in your corner. I mean, wouldn't you find out if the agent is screwed over other people ahead of time? Why do you walk into somebody's office and go, oh, okay, yeah, you sound good. All right, I'm signing on the dotted line. I've done zero homework. I haven't asked any questions. I didn't go to finra's broker check. I'm asking to get taken advantage of by an idiot.

[OG]

It's no different than any other. Any other thing. I mean, shoot, you can take your car in for an auto repair and get swindled for a grand, or you can go to the next to say, okay, I'm going to get a second opinion. I'm going to get a second opinion and finally find out. Ah, it's just a little filter that needs to get fixed here. It's an $80 fix.

[Joe Salsi]

Look at this highlighted part. This is highlighted bold print in the article. Clients very rarely know what's going on or what it's costing them. Well, shame on you if you hand your money to another human being and say, hey, I'm going to put the blinders on. I don't want to know anything that you're doing. I just want you to magically take care of it. You're an idiot. Like, you are a total idiot to have somebody do that. No. No matter what it is, you have to be able to look at your professionals and know how to. Like, how do you know if your professional is doing a good job or a bad job if you don't have a clue what's going on?

[OG]

Yeah.

[Joe Salsi]

Are you kidding me? The fact that clients, very rarely, according to this thing, know what's going on or what it's costing them. Oh, my God. Oh, you're hiring the wrong people, folks. You're hiring the wrong people. There are good people out there. They're all over the place. But we're going to insist on talking about the losers in this industry. It's so sexy to write about them, too, isn't it?

[OG]

Bad news, Good copy. All right, so you got all fired up on about that one. I can't wait to hear what the next article is.

[Joe Salsi]

Oh, ready for the next one? Well, what's funny is about this one. Usually I take the other tech with this one. This comes to us.

[OG]

You're doubling down.

[Joe Salsi]

This comes to us from Investment News Capital Group, the sponsor of American Funds sued for self dealing in its 401k

[OG]

by its own employees.

[Scott Trench]

Probably.

[Joe Salsi]

Yes. Oh, yeah, yeah. Just like the, you know, the Ameriprise suit.

[OG]

They're all the same.

[Joe Salsi]

Yeah. The plaintiff claims roughly 95% of investment options offered in the plan since 2011 were, quote, unduly expensive proprietary funds that led to less retirement savings for participants.

[OG]

Yeah, we talked about this off and on, right?

[Joe Salsi]

Yeah, this is, this is a. And by saying we talk about this, I always bring up the fact that another company is being sued, their 401k is being sued. And you have to look at. And usually it's the target date funds. Right. In this case, they're saying that 95% of the funds, which were American funds, that 95% of American funds were too expensive and they could have gone with a cheaper option that would have made them more money. I am calling BS on that one too, because American funds not cheap. Give you that. American funds not cheap. But holy cow, og, have you seen the track record of American Funds? And like, just as. As an investment company, like the standard of how that company does business, maybe not your favorite fund company, they charge commissions to get in if you buy them retail, you know, so they, they're used to working with advisors. American Funds are not screwing over their clients. They're not.

[OG]

I mean, they've been around a really long time, have really great products, have a long track record, nice corporate governance. And so let me get this straight. Their employees have to eat their own cooking, Right? Yeah. That's kind of weird, right? Like, wouldn't it be more weird if your advisor said, hey, I've got this really great investment portfolio for you. It's all in American Funds. It's so awesome. They go, well, how's your money invested? Oh, mine's infidelity. Why? So we don't get sued.

[Scott Trench]

What?

[OG]

Yeah, I believe that a lot of this. Now, again, back to the other article about there's bad apples. There are bad retirement plans. Right. There are ones that have terrible fees and it's all nickel. You know, it's all moving money from one pocket to the other and different organizations and layering and all that sort of stuff.

[Joe Salsi]

Well, and that's a lot of this. That's why I said sometimes, usually when you and I have this discussion, I come down on the other side. I'm like, oh, I think there's a lawsuit here. I think this is a good idea. This one smells to me.

[OG]

But there's more and more of these things. This is just blood in the water.

[Joe Salsi]

Oh, it totally is, chum.

[OG]

This is. This is.

[Scott Trench]

Yep.

[OG]

This is chum in the water. And there's a handful of enterprising entrepreneurial attorneys that go, well, this is an easy case. We'll just pull all the 401k plans in the world and go after 80% of them.

[Joe Salsi]

Much of the time, I read what the company spokesman says, and I kind of roll my eyes, right? I'm like, yeah, you don't get it. But listen, this one. Capital Group spokesman Tom Joyce said the complaints without merit. The funds offered to employees are recognized in the industry as having among the lowest fees in their peer categories and superior investment results. I don't know about the fee comparison thing.

[OG]

Well, American Funds has historically been a tad lower cost. And when I was at another company before I was independent, you probably remember this for your company as well, they didn't play the we're gonna pay you money to get on your platform game.

[Joe Salsi]

Right.

[OG]

They were the ones that were like, nah, our stuff's good enough. We don't have to pay Merrell to get sold by Merrill, guys. We don't have to pay Morgan. We don't have to pay Ameriprise. We don't have to pay lpl. They said, nah, we're not. We're not paying. They called that shelf space. Right. Like, to get on the preferred list at such and such a company, you had to pay a fee, usually in the 20 to $50 million range to get on the. The list. Right. Well, the company that I was at and. And I know your company as well, they're like, yeah, we're not paying that. We think our products are so good that your advisors are going to buy it, even though it costs them $100 every time to do it.

[Joe Salsi]

You could say a lot of stuff about American Funds that I will agree with this one. I just went, really? That's.

[Scott Trench]

That's.

[Joe Salsi]

That's a dumb lawsuit.

[OG]

Yeah, well. And they'll settle and that'll be that.

[Joe Salsi]

Yeah. I don't know anything about the actual specifics of the lawsuit, so I probably shouldn't say it's a dumb lawsuit, but, man, I'm first blush. Come on people, let's take some personal accountability. I am surly today.

[OG]

This is usually okay.

[Joe Salsi]

This is. This is a positive.

[OG]

Now we're gonna have somebody talk to us about trying to save freaking 25 grand and you're gonna go. Let me start with. Let me say this. How can you save 25,000 is not possible to save or it's way easier or whatever, you know, whatever.

[Joe Salsi]

They've got all those candy bars and stuff in the checkout aisle at the store. How can I save 25 grand? I can't do it. I think our lesson number one is.

[OG]

Lesson number one is you need to take responsibility for your stuff. Right? I mean, burn me once, shame on you. Burmy twice, shame on me.

[Joe Salsi]

Listen. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 on this, all these articles put together. Totally agree. Shame on. What?

[OG]

You've never heard that?

[Joe Salsi]

Heard which one?

[OG]

Burn me once thing.

[Joe Salsi]

Burn me once, shame on you. Burn me twice, shame on me.

[OG]

Yeah.

[Joe Salsi]

Is there a joke at the end of that?

[OG]

Well, there could be a joke. Maybe there's a famous person that's said this same thing.

[Scott Trench]

Let's listen.

[Joe Salsi]

There's an old saying in Tennessee, I know it's in Texas, probably in Tennessee,

[Scott Trench]

that says, fool me once,

[Joe Salsi]

shame on. Shame on you. It fooled me. We can't get fooled again. Scott Trench is a guy who saved a lot of money. He's vice president in charge of operations at this little known enterprise called Bigger Pockets. You familiar with them?

[OG]

I have.

[Joe Salsi]

For those of you that heard of them before don't know the Bigger Pockets empire. If you're interested in real estate, they're a great place to go. But they also have a publishing house and Scott has a book that I've absolutely loved called Set for Life where he details how to save money. We're going to talk to him about the early part of the book, which I know is interesting for most people listening, og which is how do you just get started? And Scott's got some great opinions. He's a little opinionated on how to get started. So let's say hello to Scott Trench. And author Scott Trench joins us. Welcome to the party, man.

[Scott Trench]

Thanks, man. It's great to be here. It's a great basement.

[Joe Salsi]

Well, glad you could bike all the way this way. Although I love this discussion you had. You were just on Cheddar TV and it almost didn't go well.

[Scott Trench]

No, I had to bike to the office and I have an E bike and I like to use that to help me get the round faster and not arrive sweaty. And I arrived a little later than I should have because my battery had died and a little way more sweaty than I should have for the interview. So, luckily, there was a big story this morning at the day we're recording this, which was Amazon is buying Whole Foods. So I got kicked out a few minutes anyways, so I was able to recover in time and talk about real estate and mortgages and all that stuff.

[Joe Salsi]

Yeah, that's funny stuff. Yeah. The good news is that nobody can see you sweating out here in the basement except me. It's kind of creepy for me, but not bad for everybody else.

[Scott Trench]

It's nice and dark and cool in here.

[Joe Salsi]

That's right. Well, let's talk about riding your bike, because part of the thing that you talk about about making that first $25,000 is you have to have some frugality. Is that riding the bike part of your frugality?

[Scott Trench]

Yeah, absolutely. So the three biggest parts of the average American's budget are housing expenses, commuting expenses, and food. And between the three of those, they make up two thirds of the average American's budget. So that's where people are spending their money. And if you're trying to cut back and be frugal and save money, and you're doing that by cutting out your latte in the morning or your happy hour with your friends or by going out to the movies, you're doing it wrong. Because that's only about 5 to, at most, 15% of the average American's spending patterns. Your money is really going in those other three categories. And transportation is absolutely a critical component of that. Biking to work can save tons of money and give you some exercise in the mornings.

[Joe Salsi]

Yeah, it gives you. It gets the heart pumping. And I know that when I exercise, I feel like I'm just so much more on when I get to work, which does the other part, which is increasing your income. It's funny because a lot of gurus talk about, you know, you've got this blue sky, right? I can increase my income, which is blue sky. I can't frugal my way to wealth, can I?

[Scott Trench]

You know, I think that frugality is a stepping stone to wealth, and obviously it's inefficient to exclusively save your way to early financial freedom or. Or a significant amount of wealth. Obviously, you should be going after income production as well. But I would argue that frugality actually makes these more achievable. And it does that in two ways. First of all, it enables you to accumulate cash with which to invest. And second, it's not really like you're being cheap, it's like you're being efficient. And if you're efficient with your day, you're planning out how you're doing things, you're biking to work, you know, which forces you to plan by, you know, having a change of clothes, lunch, a computer, you know, all the, all the stuff in your bag. You're setting yourself up for a day of success right from the beginning. And you're not going to go out and buy, you know, unhealthy food at a fast food store or something like that. Just setting you up to be efficient. And that exposes you to more and more opportunities. If you're feeling good, you're planning out your day and you're accumulating wealth with which to invest and then begin exploiting opportunities.

[Joe Salsi]

I don't want to get too, you know, foo foo about this, but there are also, what I'm hearing between the lines a little bit here, Scott too, is there's just this healthy respect for a dollar that when you're frugal with your money and you're respecting the way you spend that money, then as you're trying to grow your wealth and grow that income, you're actually going to pay attention to where the hell you put the money once you, once you get it.

[Scott Trench]

Yeah, absolutely. I think that if you're just focusing on income, you're going to lose respect for the dollars that are leaking out of your budget in various places that you're not. When you're not paying attention. And financial independence is the primary input in solving the financial independence equation is your lifestyle design. And the reason it's the prim input is because lower expenses enable you to accumulate more capital more quickly and it reduces the amount of financial Runway that you need to accumulate in order to survive for a year without work. So, for example, if you're spending $50,000 per year and you want to be able to have a one year financial cushion saved up in liquidity, you need to accumulate $50,000. Oh, and by the way, you're spending for 4,500amonth, which is going to hurt your ability to do that. Now if you can cut your spending back to $25,000 per year, all of a sudden you're able to on the same income, you're able to save twice as fast and you need half as much to kind of have that year of financial Runway. And that financial Runway is to me, of the utmost importance. It enables you to leave a job and pursue a new opportunity. It enables you to make a significant investment without kind of fearing for your personal financial position. I just believe that extending that is the. Is the primary financial aim in life until you achieve early financial freedom.

[Joe Salsi]

When it comes to the different steps that you have in your book, step number one is getting to $25,000. And you say that that's by far the hardest one. A, why is it the hardest? And B, how'd you pick 25,000? Is that first rung?

[Scott Trench]

So it's the hardest because going from a standing start with a entrenched lifestyle is very difficult because, you know, people are spending, they've made choices, they back themselves into a situation where they have a housing payment, a car payment, Lifestyle choices they're making with their kind of their habits, their food, what they spend for fun, where they're spending usually up to about 80, 90% of their incomes. And so backing away from that is really difficult for, for folks.

[Joe Salsi]

You're saying it's a, you're saying it's a bear to change your habits?

[Scott Trench]

Exactly. Yes. It's a bear to change your habits. And, and, and even if you do change your habits, usually people's habits aren't the things that are making a big difference in their budget. It's the large fixed expenses in their lives.

[Joe Salsi]

Okay.

[Scott Trench]

Like their car payment and their homes. Right. Again, between housing and transportation, you're looking at 50% of the typical American's household spending. So that is what's holding people's spending back. And those are hard decisions to change. One, you can't change your lease if you're locked into a lease for six more months right away. So it takes time. It takes maybe a year or two to really develop an efficient lifestyle in the big ways. And I'm not, I would say I'm not frugal in the, you know, the department of going out for happy hour or having fun with my friends. I'm frugal because I'm able to get to work for free and I'm able to live for free, and I don't eat out needlessly.

[Joe Salsi]

Gotcha. So just to be clear, the habits are important, but you're talking about these huge decisions, like moving.

[Scott Trench]

Exactly. Yes. If you want to be seriously expediting your path to financial freedom, then moving your housing is absolutely, you know, it's foolish to ignore the third, this third of your budget that's, that's holding you back. And I understand how that's a little bit, you know, more difficult for someone that's A little older, with a family. But if you're a young, single person and you want to achieve this goal, if you move for the first few years, you'll see an enormous leapfrog. You'll leap forward on your journey to financial freedom.

[Joe Salsi]

Yeah. We did a story recently about these people that moved to Alaska specifically because there wasn't anything for them to buy in this little town that they lived in. I mean, there were no opportunities to spend money, so they didn't spend money, and they ended up saving a bunch of cash. And sometimes I think it's those hard choices that people have to embrace.

[Scott Trench]

I got respect for that move, but that's a little bit more than I

[OG]

would be willing to do.

[Scott Trench]

I live in Denver, and. And Denver's, you know, got a nice climate and great town, and so I. I try to live for free here in Denver. And that's the. That was the purpose of me actually accumulating that first $25,000. And by the way, the second part of that question you asked me a

[Joe Salsi]

minute ago was, yes, why 25 grand?

[Scott Trench]

Why $25,000? And the reason for that is I believe that with intelligent lifestyle design, with low housing and transportation expenses, your normal millennial can live a Lifestyle that's about $2,000 per month and be very happy. If you're spending 500, $600 on rent, maybe a few hundred dollars in transportation for fun activities, but your commute to work is mostly by biking or walking, and you're spending reasonably on food, you have $1,000 in spending money per month to enjoy life. And so I think that most people can enjoy a very happy lifestyle on that amount of spending. And if you're spending $2,000 a month, $24,000 is one year of financial Runway padded by a thousand. You got 25,000. So that's kind of why I picked that number.

[Joe Salsi]

When somebody's just starting out saving, then. So you've got this extra money, you've no idea where to save it. Where do you start saving that money?

[Scott Trench]

So I think that there's a blended approach, because I feel like if you're listening to this podcast or you're interested in early financial freedom and you're starting from scratch, I know, because I've been there, that you're itching to invest, right? You're itching to begin producing some investment returns. So there's a blended approach that I think kind of a good middle ground, which is you got to have some cash in the emergency fund so you can get through your day to Day, month to month expenses. So if your monthly expense is $2,000, put 2, 4, 5,000 dollars in the bank as you're getting started. But then after that, I think I threw all my money into index funds. And I understand that that money in my kind of reserve there could go down. The market in the worst case in history, lost like 50% of its value. I understand that. And that's a risk I'm willing to accept in return for the opportunity to kind of see those historical 7 to 10% stock market returns on my cash rather than 0% in the bank. I built my first year of financial Runway by putting everything above that, about $5,000 into index funds. And I was comfortable with that decision and the risks of that.

[Joe Salsi]

I was surprised to see we think that, oh gee, my co host on the show is crazy because he's like, listen man, all stocks get rid of bonds. And then I'm reading through your stuff and you're on that train, man. You say that stocks are less risky than bonds.

[Scott Trench]

Absolutely. And it depends on your definition of risk here. Right. I'm 26 years old and I plan to live to be 100 years old. Right. I think that planning to live a shorter life would be foolish because I might run out of money.

[OG]

So wouldn't that be a bear, by

[Joe Salsi]

the way, if you showed up at like 75 and you planned on that and you just spent your last dollar like, like you put your last quarter in the Coke machine and you don't die like that's a crappy day.

[Scott Trench]

Yes, absolutely. And I think that while I'm working towards early financial freedom, why would I do something that's going to lower my probability of building long term wealth now, on average, over 30 years, I don't think stocks have ever lost to a bond investment over that, over that type of time period. So again, 26, in 30 years I'll be 56. Right. Why would I put my money into bonds right now when I know with almost statistical certainty that I'm going to be poorer than if I put that money into stocks? So that's kind of how I look at risk. Risk is to me, not the probability of losing part of my investment because I'm investing the money forever and never plan to touch the principal and only the returns of my investment. I feel very comfortable putting my money into long term investments that will likely produce more return relative to their alternatives.

[OG]

Yeah.

[Scott Trench]

And for that, for that reason, I think that index funds, stocks are a better option than bonds in this case. But I actually focus On. On real estate with the majority of my.

[Joe Salsi]

Well, that's exactly where I was going next, Scott, because you're a real estate guy, your bigger pockets, dude, which means real estate's a core part of your portfolio. Does that enter into the equation during that first 25,000 or is that later?

[Scott Trench]

Yeah. So when you look at housing, the primary reason for that $25,000 is actually to finally eliminate that housing component of the equation. Right. If you have no wealth, then the best you can do, unless you're going to, you know, move in with your mom in the basement, like you easy. There's, you know, the best you can do. If you're not willing to do that or you don't have that option, then the best you can do is really live with a roommate in a reasonably cheap apartment. Right. There's not really much more we can, you know, advice we can give you there.

[Joe Salsi]

Right.

[Scott Trench]

But once you accumulate that first $25,000, this option called house hacking presents itself. And that is huge, huge lever that is accessible to employed median income earners in this country that can again, take another giant leap towards financial freedom. So what I did is I took that first $25,000 and I put $12,000 of that down on a $240,000 duplex. I lived in half of it and I rented out the other half. Now each unit was two bed, one bath. My mortgage was 1550, and the one side rented for 1150, and my roommate paid me 550. So if you're following this, I was getting $1,700 in rent on a 1550 mortgage payment. So I was collecting about $150 per month. And if you count the operating expenses of the property, I was probably breaking around, even maybe paying a little bit to live. And that is great because I've just completely eliminated my cash outflow for housing, which, again, is really huge, important in my ability to accumulate cash. And I'm experiencing all the benefits that homeowners experience in terms of wealth building, in terms of loan amortization, paying down the loan, and then appreciation, the opportunity for appreciation. And I could do some work on the property to fix it up because I bought a place that needed a little bit of that. So all these ways that I could add value, eliminate my housing expense entirely, make money on housing. And by the way, I was able to do that pretty close to work so I could continue biking. And I've been repeating that process. So regardless of whether you want to build a big real estate portfolio, I think this is A really smart way for someone to buy their first home. You don't have to live there forever. You don't have to rent out to tenants next door forever. But if you do that for the first 1, 2, 3 properties over 3 to 5 years, I think that you can really make a huge stride toward financial freedom, build hundreds of thousands of dollars in wealth, build some passive income, and not have a major life disruption.

[Joe Salsi]

This isn't something that I thought we'd get into a little bit, but I'd like to. How much of that work do you do yourself? Or are you like me, where you started off doing some of the work just so you knew that people wouldn't rip you off? And then later on, once I know what these contractors are going to do, then bring in other people to do it for you.

[Scott Trench]

The general question there is do it yourself or hire it out, right?

[Joe Salsi]

Yeah, right.

[Scott Trench]

And I think that depends on what your time is worth. So if I start out making $48,000 per year, and at that wage, I absolutely did everything myself. I started out with $3,000 in the bank after graduating college, which is fantastic. I didn't have student loan debt, but $3,000 in the bank. And then I made $48,000 per year. So my time was absolutely worth less than the contractors on a dollar by dollar basis. So I did as much of the work as I could myself to get started. Now I've got two duplexes and significantly more wealth.

[Joe Salsi]

And.

[Scott Trench]

But my career is going well. So now I'm starting to hire out some things and do others myself.

[Joe Salsi]

But I think, even though, I mean, and I get your point, I love this idea of valuing your time. But I also like the experience factor because now, you know, when you talk to a contractor, if they're full in your head full of crap, like I've had contractors tell me stuff before and I'm like, yeah, you're not right there. Like that is. That is so wrong. Like, I was born at night, but not last night. And I think it's. I think that part of the computation, it's tough to do the. What's my time worth? You know what I mean? Because you're getting an education.

[Scott Trench]

Absolutely. And I think that when you move from being like a tenant, you know, I was 24 years old. I had never really done much work on the house except for helping my dad with a few things here and there. I had no tools. I was a wuss. So when I started doing this and everything was a challenge, like every time I Wanted to do a prepare, I have to go to Home Depot and come back. And then, oh shoot, I bought the wrong component. I go back to Home Depot and

[Joe Salsi]

come back, they know you, they know you by name after a weekend. Right.

[Scott Trench]

It's horrible. And nowadays I find that stuff like pretty easy. And it should be. It's not because it's because I did it a little bit. And yeah, you're absolutely right. When a contractor comes and I had a contractor try to bill me $2,000 to patch some holes in a soffit underneath my roof one time and I was like, this is a three hour operation. I get the materials for 120 bucks. So I bought a friend lunch and a couple of beers who's interested in real estate. And together we patched all these holes in about two or three hours. And it cost me about $220 to, to do this project. And that was absolutely worth my time. I don't make $600 an hour. So you know that that's, that's the kind of stuff that. You're exactly right. If you can do some of the stuff yourself, you'll save thousands and thousands of dollars. And that's a big advantage by the way of investing in your backyard rather than somewhere out of state.

[Joe Salsi]

Yeah, right, right. And man, I wish we had time to get to that. I want to bring up a few of these points that you make at the very beginning of the book. You should start by saving the next thousand dollars, not earning the next thousand. So back to your point originally, start off with frugality. I think that's what you're saying.

[Scott Trench]

Yep, absolutely. So like when you earn $1,000 and you're like me when I was in that first stage, you're probably at a tax bracket of about 30%, 33%. So if you earn that extra thousand dollars, you're only going to get to keep about 666 of that. Right. If you save $1,000, all of that is after tax. If you don't spend it, you get to keep it. So it's tax wise, much more efficient. And second of all, saving that money, again, if it's a monthly recurring cost. Yeah. You're reducing the amount of financial Runway you need to build and save that money. So again, has a double impact in your finance.

[Joe Salsi]

Gotcha. I want to go over a lot of these, so just give me one or two sentences on each.

[OG]

Okay, great.

[Joe Salsi]

You should spend more, not less on entertainment and fun. That was cool. Everybody likes having more entertainment, more fun. Why? Why that one.

[Scott Trench]

Well, spend less on housing, transportation, and your, you know, ridiculous eating out expense. And then spend more on the beers with your friends and the, and the fun stuff. That's, that's what life's all about.

[Joe Salsi]

I'm hanging out with you. Third, student loan debt is rarely worth it.

[Scott Trench]

So going back to school for an advanced degree, if you aspire to early financial freedom, can be a real drag on your goal there because you're going to accumulate a lot of debt. And while you will make that up over the course of a very long career, the goal here is to have a short career or have the need for a short career and make work optional.

[Joe Salsi]

Got it. Buying a house, or worse, a condo in the best part of town will slow you down in your path to early financial freedom. I think we, we killed that one. We covered that one. Stock's less risky than bonds. You need to spend less money to earn more money. We covered that. Developing a specialty is far more risky than being a jack of all trades.

[Scott Trench]

So I believe that in today's economy, every job that exists that humans do kind of repetitively is going to be outsourced at some point in the future. So if your specialty is in a very niche field and a breakthrough comes in that makes you irrelevant, you're kind of, you know, up a creek without a paddle. So I believe that the key to survival in today's economy and then success is the ability to adapt and adapt rapidly to change. Your value is not in your ability to operate a specific software. Your value is in your ability to learn quickly and produce value and then automate yourself and move on to the next thing.

[Joe Salsi]

Man, I'm totally with you there. And people don't realize the speed at which that's coming, by the way, that is coming way quicker than we think it is. The last one. And this is the area that. Maybe I should have brought this up earlier because this is the area where we may disagree. Contribute less, not more, to your retirement accounts and be ready to withdraw from them early. Is this because you're looking at a fire lifestyle, at a financial independence, retire early lifestyle?

[Scott Trench]

Yes. Remember, my audience is going to be a little younger. So the goal is not to retire at 65 with several million dollars in wealth. The goal is to replace your need for wage income early in life. 30s, 20s. And if you're doing that and your money is in retirement accounts, you're not going to be able to use that money to make key life decisions or significant investments without getting very creative. And I do, I do Understand that there are lots of ways to get creative with your retirement accounts and I have an entire section in the appendix that discusses that. It's very technical. There are ways to withdraw from them early. Take the match. You know, I'm very big fan of taking free money and the match, but I do not max out my retirement accounts. I keep most of my wealth building after tax that I can spend today.

[Joe Salsi]

Well, and if you're starting early, you don't need to max out that account. I mean, you really don't. You look at the compounding value of money. I mean, over time you can get the match. You'll probably have plenty for after 60. So I guess we don't disagree. That's annoying. I hate it when we agree on all these different points. I don't want to the book is called Set for Life. Where can people get it?

[Scott Trench]

You can buy it on BiggerPockets. BiggerPockets.com set4life. That's F O r not the number. And then you can also check it out on Amazon. You can google it.

[Joe Salsi]

Awesome. Scott Trench thanks for hanging out man.

[Scott Trench]

Thanks so much. It's great to be here.

[Doug]

Hey everyone, I'm Joe's mom's neighbor Doug. Welcome to my trivia segment. So check this out. Joe and Og were talking shop earlier today and they were throwing out some really weird phrases like self flushing and biodegradable. I know they're just trying to show off. Well, joke's on them because this guy knows how to google. Here's the question. Another term they used seemed like a money phrase. So here's your question. What is the financial term muni bond short for? I'll have the answer for you. Hopefully if my Internet connection works. Works right after the break.

[Joe Salsi]

As you hear this, I just got back from keynoting the Millionaire Money Mentors conference in Florida. I'm sure I had a great time even though I haven't gone yet as I record this. But I know wherever any stacking Benjamins people are, it's always a party, isn't it? But what makes it even better party is the fact that when you see pictures of me, those clothes came from quints. I've been getting intentional lately about what I wear day to day and on stage and leaning in more into pieces that feel easy, that are comfortable, that I can travel with and still look put together. It just makes getting dressed simpler. Whether I'm at home or on the road. Quince has been my go to. The fabrics feel elevated, the fits are clean. Everything just works without needing to overthink it, Quince has all the wardrobe staples for spring. Think 100 European linen shorts and shirts from $34. Lightweight, breathable and comfortable, but still look put together and clean. 100 Pima cotton tees with a softness that has to be felt. Their pants also hit that same balance. Relaxed and comfortable, but still polished enough to wear pretty much anywhere. Everything's priced 50 to 80% less than what you'd find at similar brands. Quince works directly with ethical factories and cuts out the middlemen. So you're getting premium materials without the markup between the pants that feel so incredibly comfortable. And my favorite is still that first cashmere sweater that I got. It is so nice. It's great to feel good because you know that your wardrobe looks good and it didn't cost anywhere near what I thought clothing that looks like that would cost. It should be the same for you. Refresh your everyday with luxury you'll actually use. Head to quince.comsb and because you're a stacker, you'll get free shipping on your order and 365 day returns. That's Q U I N C E.comSB for free shipping. 365 day returns. Quint.comSB.

[Doug]

Hey trivia fans. Welcome back. I have some good news and I've got some bad news. I always believed in bad news first. Why leave things on a sour note? So here we go. The bad news is that self flushing is irrelevant to the show.

[Joe Salsi]

Yeah.

[Doug]

Hey Steve, can you take out that part where I said in the first part of the trivia about self flushing? Yeah, just. Just rip it out. Just flush it. Let's see what I did there.

[OG]

Steve.

[Doug]

Just flush. Okay. Hey, I'm back folks. Thanks. And now for the good news. Your trivia answer. Before the break, I asked this question, what is the financial term muni bond short for? The answer when I looked up this one, you'll be as frustrated as I was that you didn't guess it right away. Because a muni bond is short for municipal bond. A little sleuthing turned up the fact that municipal bonds are issued by state or local governments and their agencies. Muni bonds help raise revenue for anything from roads to airports. Investors like them for another reason. You'll probably get a federal tax break on the bonds and may even get a state tax break as well. Who knew? Time to continue my research into all these words. I don't know. I'll make sure. I'll let you know if I find any good ones.

[Joe Salsi]

Big thanks again To Scott Trench for coming down to the basement and oh gee man, just do it. Just get started.

[OG]

Get er done.

[Joe Salsi]

Absolutely. Hey, let's throw out the AVEN lifeline and tackle some of life's most important questions. I'm throwing out the lifeline to Harlan. Say hello Harlan. Hey Joe and OG.

[Scott Trench]

Question for you guys.

[OG]

Over every long term period I can

[Joe Salsi]

see with index funds International has underperformed

[Scott Trench]

the US this underperformance hasn't led international stocks to become cheap like you'd expect. The PE ratio for Total International is

[OG]

over 20 according to Vanguard.

[Joe Salsi]

So after what time period of underperformance

[Scott Trench]

does an investment stop being a good idea?

[Joe Salsi]

50 years? 100 years?

[Scott Trench]

If somebody had like 50, 50 US

[OG]

international over the last 20 years and they are retiring soon, their international investments would have underperformed bonds.

[Scott Trench]

I mean that's pretty bad. I'm scared to invest internationally because I'm

[OG]

worried there's something fundamental causing these lower returns.

[Scott Trench]

I know the market's supposed to be efficient, but it just doesn't seem that way here.

[OG]

Thanks.

[Joe Salsi]

Awesome. Great question from Harlan. So international og, let's go there because this is fun.

[OG]

Great question. On international investing. It is completely different than US investing. Part of the reason that I like international in emerging markets and I separate those two. Generally speaking, emerging markets are up and coming countries. So India or sometimes Russia gets thrown into that category. Smaller countries that have really small economies would also get thrown into there sometimes and then developed international, which are kind of like your Western European countries and Japan and that sort of thing as a separate category. The great thing about international investing and emerging markets compared to the US is the fact that they're what we call non correlated. So they zig when other things zag and it provides a great opportunity for rebalancing. I think that the one piece that's impossible to. Well, it's not impossible to measure, but when you look at a 20 year track record is the impact of rebalancing your portfolio as other things have become overweighted or underweighted as time has gone on. For example, just recently small company stocks did really well in the United States for about six weeks right after the election that caused them to be overweighted and you had too many of them. So if you rebalanced in your portfolio then you ended up buying the thing that was underweighted, which happened to be emerging market at the end of last year, the beginning of this year, number one performer so far year to date. Now I know we're only six months into the Year. But this again will help with the rebalancing number one performer, emerging markets. So it just provides a great rebalancing tool for your overall portfolio to, you know, yin and yang and zigzag, so to speak.

[Joe Salsi]

I also think we're looking at this, Harlan, at a certain point in time when you look at the 1 year, the 3 year, 5 year, 10 year, where you say, okay, under none of these circumstances from today back had it made sense. But there have been points in my career where you look at those 1, 3, 5, 10 year track records and you're like, I should have been more in international. I'm with you. It's not as often as looking at the core US But I think that part of what's killing us right now, OG is especially when we look at large cap International, is just the point where we're sitting right today, right now, which to me, this is just me, says opportunity. It doesn't say opportunity like let's go bet the farm on it. But it also says that reversion to the mean is alive and well and I want to make sure I've got some international in my portfolio because of that. And you know what, Fan of emerging.

[OG]

I was going to say you're pointing out a very interesting piece here, which is because the last 10 years, nay the last seven or eight anyway, the US stock market has trucked everything else, I mean, just especially US large company growth funds, right? S&P 500 has destroyed almost everything else over the last eight years, seven years. So it's kind of hard to use that as a measuring tool. I think if you like, to your point, if you go back and go, well, what did it look like in the 1, 3, 5, 10, 15, 15, 20 and 30 year periods in 2007? It looks a little different. Here's the other major thing when it comes to reporting, we have really good data on stocks in the United States since 1926. That's kind of like the generally accepted time period that we measure things from in the international world. However, those records didn't exist as well until the late 60s. So a lot of times when you look at international time periods, you really are only looking at from 1970 till present, 1975 till present, which is still a long time, right? 40 years, but not nearly as long as a 90 year track record like the US market and some places like Jeremy Siegel and his book Stocks for the Long Run, he's got data all the way back to 1802 on the US market. So some of that Has a little selection bias, I guess. We just happen to be looking at a time period in international that was kind of a little funky in weird spots, right? The Japanese market was kind of funky for a while. You had the Russian market in the late 90s. That was pretty funky, too. So to your point, not betting whole hog, but a great diversifier and provides a great opportunity to balance the portfolio out. And I don't know that you're 50. 50. Anyway, back to Harlan's point. I don't know that you're 50% US, 50% international. 60, 40, 70, 30, maybe.

[Joe Salsi]

Well, yeah, I'm traditionally in the 30, 35% range in my portfolio. But it depends on your goal, right? Depends on your goal, your risk tolerance. You're definitely going to. I say definitely. Well, if you add more emerging markets, you're going to increase standard deviation. You're going to increase the up and down in the portfolio. So it's going to be more of a roller coaster. Depends on what kind of ride you're looking for, right? Strap in, baby. Or do you want the nice. Nice and easy, which is what now? I won't go. I almost did it again. Thanks for the question. If you've got a question and would like us to throw out the Haven lifeline to you, it's really easy. Here's what you do. You get to stack your Benjamins.com forward/voicemail. Just click that button and start talking. And as long as there's a microphone on your computer, bam, you got it, you're done. Or on your phone. Really easy. Stacking benjamins.com forward/voicemail. Doug also brings down the mail. And today we're going to read the letter from our friend Taylor. Taylor says, hey, Joe, been listening to the podcast pretty frequently for almost two years now and don't think I've heard this topic discussed. I was wondering your NOG's thoughts on using money from your IRA to buy your first home. Are there any situations that makes sense to do this? What I can think of is if you plan to rent the house out in the future for an amount that provides a higher rate of return. Also, it could be an option if you use that money to meet the 20% down payment to help avoid PMI and then make monthly deposits back into your account before you file your taxes. Obviously, with this strategy, you risk losing market gains. But the PMI percent on the loan would most likely be more than the gain from the market. For example, assuming 1% PMI and $100,000 loan would be $1,000. Whereas the average market return of 7% on 10,000 be 700 bucks. So avoiding the thousand, he says is better than the 700. Interesting take there, Taylor. What do you think, man?

[OG]

No, this is a terrible idea for a whole host of reasons, mainly tax issues. Right. We're going to pay income taxes on the distribution, which is going to smoke whatever your PMI number is in terms of the cost. There's no penalty. So you can use some of your IRA earnings, right, to use on your house down payment. That's an exemption to the 10% penalty. But here's a major problem with what your plan is there to repay the money, so to speak. You can only do that once every 12 months and the money has to be back in 60 days. So you can't do it over the course of a year. You've got to put the money in, in 60 days. So arguably, yeah, you could go short term. I need 10 grand, take it out, 45 days later I put it back in. No harm, no foul. But remember now, you can do nothing else with any other ira. You can't move it from one brokerage company to another. You can't take the money out again. You have to wait 12 months to

[Scott Trench]

do all that stuff.

[Joe Salsi]

And because you can't do that, people often think that still the cost difference here, you know, you look at $10,000 and then it's $700 that you would have made versus $1,000. And that's not.

[OG]

But you're gonna pay $2,500 in tax.

[Joe Salsi]

Yeah, well, and that's also not the entire computation because of the fact that you probably won't be able to pay back the 10,000 in a 60 day period. What you're really looking at is the compounding interest on that 10,000 bucks, which, you know, the rule of 72. Let's say that you think you're going to earn 8% on that money every seven years, that that money would have doubled nine.

[OG]

That'd be the rule of 56.

[Joe Salsi]

That's rough.

[OG]

I like your rule better by the way.

[Joe Salsi]

That's so funny.

[OG]

But arguably we have to use the rule of 72.

[Joe Salsi]

Math is not my strong suit.

[OG]

Math me, good number of me likey.

[Joe Salsi]

Wouldn't that be horrible? Be a financial planner be that bad at math. I just, I get talking so much my so fast, my brain's not giving up. But you're right, every nine years, right, Every nine years that money would have doubled. So man, that's.

[OG]

But assuming you know a lot of

[Joe Salsi]

Retirement money you're giving away for 10,000 bucks.

[OG]

If it was a really short term thing though, what do you think about that? Like, it's like, hey, I got a bonus coming in. It's guaranteed. I know it's happening. I know I'm going to get 10 grand. I need 10 grand to close on my house. Bonuses coming in 30 days. You take the money out of your IRA and go. I'll just put it right back. Would you do that?

[Joe Salsi]

Me? I've seen so many things go wrong, Roger. Whitney and I were talking about this when you're gone last Wednesday, which is that.

[OG]

Wait, what? You cheated on me?

[Joe Salsi]

I love what you sat on the table under the microphone.

[OG]

I knew it was coming, right?

[Joe Salsi]

Yeah.

[OG]

Don't get too comfy, said Roger.

[Joe Salsi]

Don't get too comfy. Oh, gee, that was. That was pretty. He thought that was funny. I thought that was funny. And of course he immediately spilled his beer all over it. But anyway, not that we. Not, not that we have beer at 7am when we record these things.

[OG]

But anyway, we're just finishing up having beer at 7am Roger.

[Joe Salsi]

We're done by then. Roger and I wrap it up around

[OG]

5:30 in the morning.

[Joe Salsi]

We're talking about the difference between financial planners and the average person. I think the average person would do that. Financial planners have dealt with larger numbers of people and the amount of times we see screwy bad stuff come out of left field, it was amazing to me once I started working with more people. So no, I wouldn't do that. I would just wait until you have the damn money in your hand and do it that way.

[OG]

Figure out a different way to borrow the 10,000. Ask mom and dad for it and pay them back.

[Joe Salsi]

Head to the casino. Yeah.

[OG]

Or. Yeah. Or take a hundred bucks to the casino. You only got to win. What is that? About eight hands of blackjack in a row by doubling each hand.

[Joe Salsi]

That's easy. That's so easy. That's the easy button. They got that easy button. That's the.

[OG]

That's the rule of two. That's my rule. I call that the rule of two.

[Joe Salsi]

Right?

[OG]

How long does it take you for you to take all of your retirement savings and either retire or become penniless? Two hands of blackjack.

[Joe Salsi]

How many pieces of clothing do you come back with? 2. That's a rule of 2. And they're not the ones you want to come back with. It's like your.

[OG]

How many dollars do you have left in your bank account?

[Doug]

Two.

[OG]

And the only reason you got two is Because. Because the ATM won't let you pull out the two dollars.

[Joe Salsi]

Yes. So bad. Yeah, because you're already maxed out all the credit cards, too. But. But, hey, I'm good for it. I'm good for it. And the good news is, oh, gee, you got the free buffet, so it's like having your last meal, right?

[Scott Trench]

Yes.

[Joe Salsi]

Yeah. Good stuff. All right, if you've got. If you've got a note for the show, I would encourage you to have us throw the Haven lifeline out to you. Stacking benjamin.com forward/voicemail. Or write us a letter. Head to stackingbenjamins.com and it says question for the show. Click that link and you'll see both Haven lifeline and the way to write us a note. Or you can just send me one. JoeStackingBenjamins.com thanks to everybody who's done that. Also thanks to everybody who's left us a review. You know, reviews are the way people know what they're getting into when they hear about the show. So thank you very much. 352 people have done that so far, and we thank you very much if you're one of those people kind enough to take a few minutes and help us out. And lastly, for those of you that know you need tons of help and you're not sure where your next stop is, guess what? Oh, Gee's taking clients. So if you're looking for professional help in your corner, stackingbenjamins.com letter O and letter G to find out more, that'll take you right to OG's calendar, and you can talk about what it takes to get him in your corner. All right, that's it, man. Thanks again. Well, yeah, I always start off doing this, and I know that Doug's about

[OG]

drumming his fingers in the corner going, stealing my thunder.

[Joe Salsi]

Stealing it.

[OG]

All right, Dougie from down under, if

[Joe Salsi]

you know what I mean. What should we have learned today?

[Doug]

So what do we learn today? Well, first, switching from financial advisor to financial advisor. Maybe the problem isn't that all financial people stink. Maybe you need a better approach to find the right person on your team. Start with your goals. Find personal recommendations and check out an advisor's complaint file at the FINRA broker check website. Second, trying to save money while you can't frugal your way to riches. Scott Trench made a fantastic point. By respecting dollars early on in your saving career, you'll save faster when money comes in, and you'll also have more money available for those meaningful events in your life. But The Big Lot lesson. It turns out that when you're googling phrases about money, the terms money fight and money shot have way different meanings. I tried looking those up on Joe's mom's computer and that got awkward. A big thank you to Scott Trench for taking time to visit the basement. You can find more on his [e-mail] or of course at our Show Notes at Stacking Benchmark this show was created by Joe Salsihai, produced by Richie Rudder Reese and engineered by the amazing Steve Stewart. Kathleen Selmans handles design, newsletter and classroom opportunities. If you'd like to learn more, head to stackingbenjamins.com classes online. Visit us on Twitter at benjaminscast or on our Facebook page. Shannon Cowan is our community manager and social media guru. I'm Joe's mom's neighbor, Doug, and I'm gonna go buy you drinks until you find me attractive. SB Podcasts may receive payment on the show from sponsors and guests in the form of books, giveaway items, discounts, or other remuneration. There's no way you would take advice from these dorks, but like Joe's mom always says, don't take advice from people you you don't know. This show is for entertainment purposes only, and before making any financial moves, consult with a real financial advisor. Special thanks to Dave Ramsey for dropping by the basement. Unfortunately, we ran out of time for his segment. Maybe next time, Dave.

[Joe Salsi]

Welcome to the after show part of the show that doesn't exist. We do things in the after show that have nothing to do with money. So if you're here for more money chatting, see you later. We'll see you next. Joe.

[OG]

Occasionally everyone's doing money, right?

[Joe Salsi]

Sometimes we do.

[OG]

Usually spending it.

[Joe Salsi]

We spent so much time and energy today, though, really ranting about we were ranty.

[OG]

This we is. I know you did. I sat here and Is ranty a word?

[Joe Salsi]

Ranty. I'm.

[Scott Trench]

Yeah.

[Joe Salsi]

He was feeling ranty today.

[OG]

Yep, sure is.

[Joe Salsi]

Yeah, I listen to a bunch of podcasts, but I generally listen to the same ones over and over. You get hooked on podcasts and you get attached. You get attached to a certain podcast and if it's good, you just keep going. So you know my ability to try out new stuff. Like as an example, S Town. Have you listened to S Town?

[OG]

Never heard of it.

[Joe Salsi]

Huge podcast. A lot of people talking about it and I haven't even had time. Jimmy Fallon has been talking about S Town and I haven't had time.

[OG]

How do we get Jimmy Fallon to talk about Stacking Benjamin.

[Scott Trench]

I know.

[Joe Salsi]

Really? Come on, dude, talk about that.

[OG]

Maybe we should get him on the show versus us.

[Joe Salsi]

Yeah. I don't know. Jimmy Fallon. It's kind of low ball. No, I'm kidding.

[OG]

Okay.

[Joe Salsi]

Yeah.

[OG]

So there went our offer to Jimmy Fallon.

[Joe Salsi]

Would love to have Jimmy Fallon on the show. But I was reading something that. That a writer I really like was talking about and mentioned that they'd moved to Great Britain. And we're talking about some podcasts that got them through, like, not knowing anybody living in a new country. And so they were British podcasts. And there was one that I'd heard about before that I'd like to talk about here on the show. British humor. Do you like British humor?

[OG]

Is it any different than American humor?

[Joe Salsi]

It is a little different.

[OG]

Is it still funny?

[Joe Salsi]

It is. It is very funny.

[OG]

Well, then sure, I probably like it.

[Joe Salsi]

It's also very wry. It's not always as straightforward, and sometimes.

[OG]

Oh, are you saying that I'm a pretty. Like I'm a simpleton. I've got to have it handed to me on a silver platter to get it?

[Joe Salsi]

I didn't. Man, did you all of a sudden get defensive? Holy cow. Where did. Lighten up there? Geronimo. I don't even know what that means.

[OG]

I've never even heard that.

[Joe Salsi]

No, me neither. I think I just made that up, but it rolls off the tongue, but I don't think it's good. So this podcast has a name that I had heard before, and I thought, oh, gee, this was going to be a certain kind of podcast. And it turned out it kind of is, but it is so absolutely funny. And by the way, if you're easily offended, you're not going to want to listen to this next part. There's not going to be any swearing, but they are talking about a. A topic that some people aren't very comfortable with. And this podcast is called My Dad Wrote a Porno.

[OG]

James, Alice, thanks very much for doing this with me.

[Scott Trench]

No problem, Jamie.

[OG]

There aren't that many people I would want to be sat around a kitchen table with reading out my dad's erotic literature. I can't believe we made the cut. Well, we go back a long way, Alice. What can I say? I can't trust this sort of material with my new friends. So, guys, this podcast is gonna be pretty simple. It's basically going to be me and you two, and I'm gonna be reading a chapter a week of my dad's porno novel. What's it called? Well, do you want the full title, yes, because it is called Belinda Bling.

[Joe Salsi]

Blinked.

[Scott Trench]

Belinda Blinked.

[OG]

Belinda Blinked.

[Joe Salsi]

Is that her name?

[OG]

Belinda's her name.

[Scott Trench]

Hot. Yeah.

[OG]

It's a sexy name, isn't it?

[Doug]

I think dinner lady.

[Joe Salsi]

And then I think, what's she gonna do? What's she gonna serve up this sexy dinner lady?

[OG]

I don't know whether he's confused, winking and blinking, because blinking isn't the most sexiest.

[Scott Trench]

That makes me think, like, ophthalmic ish

[OG]

isn't very alluring, isn't it?

[Scott Trench]

I think cataract to blink at someone.

[OG]

And maybe just because of the alliteration, he wanted it to be B. So there's no other word that begins with B. So blinked. But the real title to give it its full title is Belinda Blinked one A Modern Story of Sex, Erotica, and Passion. How the Sexiest Sales Girl in Business Earned Her Huge Bonus By Being the Best at Removing Her High Heels.

[Scott Trench]

At removing her high heels.

[OG]

That's the title.

[Scott Trench]

Whoa.

[OG]

Yes.

[Scott Trench]

I thought that was the blurb.

[OG]

No, that's the title.

[Scott Trench]

He's used up a lot of his word count there.

[OG]

He just couldn't get that on Twitter.

[Joe Salsi]

I don't know how you can't get that on Twitter. I have to tell you, I have listened to five episodes of this podcast and I've laughed my head off. And by the way, you think my dad wrote a porno, that this is going to be something that is, you know, really is erotic and has erotic stuff going on, and every time that his dad, who, by the way, is in his 60s and mom is horrified that her husband has written one of these things and is marketing it and gave it to his son to read. Right. And son now, of course, is. Made a podcast of it. That it. Every time there's anything that should be titillating, I think is the word. It's not. It's horrible. This whole thing is an absolute train wreck that this guy's written. And I've laughed and laughed and laughed. Now, if you don't like sexual topics, if you don't like some of the bad words that are out there, you probably want to stay away from this podcast. But, oh, for me, Holy.

[OG]

It reminds me of the book that I read some years ago called SH T. Right. So I'm spelling it out right. So that's how it's written.

[Joe Salsi]

My dad says.

[OG]

My dad says. Yes, Stuff my dad says. But with the. It is. It is S word.

[Joe Salsi]

It is very much in that same vein where you just can't believe that and and the dad all of a sudden, like, steps into these sexual situations that aren't sexual at all. And then the way he describes them is just gross.

[OG]

Like exactly how a 60 year old dad would describe it.

[Joe Salsi]

Oh, it's just, it's horrible. You're like, oh, man.

[OG]

So I was at Lowe's picking up some lumber.

[Joe Salsi]

Yes.

[OG]

And then all of a sudden, yeah.

[Joe Salsi]

He talks about this woman sitting and sweat is dripping down her right thigh. And the woman, Ellis on the show, she's like, boy, that's sexy. Sweaty woman, sitting, dripping sweat.

[OG]

Nothing needs to go back to adjective school. Like, change him up just a skosh.

[Joe Salsi]

It's absolutely horrible. And they're talking about a private part and about how a lid opened. And the one guy goes, I don't know anything about this particular part of the body. Like lid, like lid, Alice. And she's like, I never thought about my body part as if it were a Tupperware dish. Just like, I can't stop. Cheryl and I listened to it and neither one of us at first are like, really dead. Wrote a porno? I don't think so. Listened to it all the way home from Dallas to Texarkana recently and oh my goodness, oh, I laughed my head off. And now, by the way, five episodes in Cheryl's like, okay, this is just the same thing over. She goes, it was really funny at first, but now they're just laughing about the same stuff. And it is the same stuff. I mean, it is a bad, bad, bad novel. So if you don't want more of the same, listen to the first four or five episodes and you're done. Like Cheryl is. But for me, my dad wrote a porno. Just so amazing. So that's my review. How about that? Is that the second time? I think, I think we reviewed Betty and this guy with the suitcase was the only other one we've done. All right, guys.