Afford Anything - How Jay Became a Half-a-Millionaire -- and Why He Wants You to Track Your Net Worth

Episode Date: February 5, 2016

#8: J. Money is a HALF-MILLY! He loves to share his journey to growing net worth on his blog, as well as the net worth of 180 other financial bloggers. See the short list and find links to resources by visiting the blog at https://affordanything.com/episode8 Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hi, Paula. Hey, Jay, what's up? Talking to you. What are you doing? Talking to you. That's probably like the nerdiest intro, but I always wanted to say it. Actually, I'm recording a podcast right now. That's true.

After that, I might send some emails. Sexy. You're listening to the Paula and Jay Money show. We'd rather be at a bar with you right now, but this is the next best thing. It's Financial Freedom Time with Paula Pant and Jay Money. So all right, what are we going to talk about today, Jay? You were telling me that you wanted to pick my brain on net worth stuff. And net worth is my favorite topic in the world.

So I'm ready for you. Cool. So yeah, I've been curious about this. So for people who are listening, Jay is famous, absolutely famous for publicly disclosing his net worth every month. That's fun. Tell me about that. So when did you start tracking? First of all, let's just jump right into the juice of it.

Sure. As of the time of this. recording. How much are you worth? My net worth right now is 493,000 and change. So real close to the half a million mark. You're a half a millionaire. Half a millionaire. Now that it sounds sexy, yes. Half a millionaire. I wonder how that URL is taken, half a millionaire. Yeah, you know, it's funny. Like when I first stumbled across blogs or money online, like I didn't know there was any, I didn't know what blogging was like seven or eight years ago. So when I first started typing in, you know, need a budget, want to learn it to save money.

You know, I was surprised to see a lot of normal people talking about money online. And there were a few, one in particular, mymoney blog.com, which is still around by Jonathan. He used to publish his net worth every month. And that was the first time I'd ever seen, I guess, pretty much ever, someone's real life snapshot of their money. You know, because we don't talk about, and we talk about money in just. general, but it's always like, oh, this sucks, or I owe dead or, you know, or, oh, I just became, you know, I made millions of dollars on this, but you never see an overall snapshot. And that was really fascinating to me.

So for a few months, I just followed it. And when I decided to blog myself, that was like the first thing that I wanted to do because I just thought it was just mind-blowing. And it didn't even matter. Like, I saw he, I think, I don't remember how much he had at the time, maybe like 600,000, which was really fun to watch. But then over time, like, you get people, I mean, shit, I track, like, 180-something bloggers net worth over at Rockstar Finance, and you get people from negative

150,000 all the way up to like three or four million. So it's a wide range, but I'm honestly, like I love seeing anywhere in that range because it's just fascinating to see like where everyone's money is, what they're working on, how much savings debt, you know, and like my net worth 400 something thousand of it is all tied up in index funds in the stock market. Whereas others, they have like a real estate portfolio or they have, they're invested in businesses or they're doing peer to peer lending. There's so many different ways to grow it. So it's fascinating to see what other people are doing and what they're good at, what they suck at,

what they like, what they don't. And for me publishing it online for, you know, at the time, two people to see and now hundreds of thousands of people to see, it holds me a lot more accountable. I don't do a lot of things because I know I have to blog about it later. Let me actually just pause here. I think many people are familiar with net worth, but for the sake of the listeners who aren't, what is net worth? Yeah, so I just like saying it's a snapshot of where all your money is at any given point of time. And there's two sides.

You have the assets, which are all the good, awesome things. And then you have the liabilities, which is all the debt. So in your assets, you know, any savings you have, investments, property. And most people stick to just like your home or real estate that you own. Sometimes you'll put cars in there. You know, there's a little gray area of what belongs in there and what doesn't. But in the majority, anything that you own that has value is pretty much, you know, goes in that category. And then the liabilities would be, you know, credit card debt, student loans, you know, mortgages, anything that you owe someone. And in a nutshell, your net worth is all your assets minus, you know, all the debts. So what you own minus what you owe.

Yes, that would have been an easier way to say it. Very good, Fala. I didn't come up with that myself. I read it somewhere and it stuck in my mind because I like things that rhyme. Yeah. Well, I guess it doesn't rhyme. I like alliteration. Well, I know you're a journalist, so I thought you're a journalist.

But yeah, you know, and there's this whole thing. Well, I don't think houses belong in there. And I don't think, you know, your property belongs. You know, people have their own ideas of what goes in there and what doesn't. And at the end of the day, it really doesn't matter. What does matter is just that you know what's going on in your overall financial picture and then that you're working towards improving it. Right.

And that if you track your net worth over a long term, regardless of what you choose to include or not include, that you're consistent about it. So you can't like in January include the value of your car. But then when you go to update it in March, look at the numbers and be like, I don't like what these numbers are, you know, and then like shuffle things around. Yeah, yeah, because the whole point, and you know, most people don't share it with the world. So really it's just for you. So you're the only one that knows. So, I mean, you could like trick yourself and like, oh, I'm doing so good today because I took out my debt, you know.

But there's no point in doing that. Right. Yeah, it's like standing on the scale, but like with one foot still on the ground. Yeah, there you go. Look, I've just lost 40 pounds overnight because I'm not putting all my body weight on this scale. Yeah, there's no point in being stupid to yourself. You know, and the other thing, too, like even with just, you know, with the cars, right? So most people that don't put cars and say, well, that's like, you know, it's not earning me

anything, so it's not a true asset, you know, and I need a car anyway, so it's not like I'm going to just turn around and sell it. But then they'll take the car value out of the assets, but then they'll leave the debt in the debt department, which is fine. Like, that makes you even better in a way because now, like, your net worth is lower, so you're more conservative. Right. But to me, there's an imbalance.

with home ownership, like some people will just put what they own the mortgage and they'll completely leave the house out of the net worth because to them, it's not money they can tap. So it doesn't count. So some people will track net worth for like, you know, if I had to cash out everything right now and live off of my savings or my investments, how much would that be? Right. And so only the liquid stuff's going to count because you're not going to sell your house and then not have a place to live.

Right. I mean, you can, you know, if you're extreme, but there's all different ways. But in a nutshell, the whole point of it is to track. You know, you need a number to know where you stand so you can measure it, you know, every month or six months or year going forward, you know. And for me, I do it every month just as a habit now. I mean, I think, you know, the last one I published was, I don't know, a month number or 100 something. Like I've been doing it for almost eight years next. Yeah, I think almost eight years now. Wow. So eight times 12. Was that nine, 96? Yeah. You know, and I started around, I think it was around 40,000 or 50,000. you know, so in the eight years went up to 500,000 and some years were better than others, and you got the stock market crash, and then the gain, and, you know, then I had kids,

and I left the job and went to another. So, you know, your life changes drastically over those eight years, you know, but at any given point, if you're like, hey, what was your network back in, you know, January of 2013? You know, I could tell you, and if I look at it, right, because I, you know, A, I track it, but I also publish it online with my thoughts. So I'll go, every now and then I'll just go like if I'm like, I'm feeling like shitty today, you know, let me go back in time and feel better about myself, you know, like financially where I was at, you know, now compared to then.

I'll just randomly pick one and read through my thoughts and what was going on in that time of life. And it's just interesting to follow your own journey over time. Yeah. Yeah, it is. It is. What was your net worth when you started, when you started tracking it? When I started tracking it.

A hundred months ago. I started tracking it before I started blogging. And I think it was around 30 or 40. And then when I hit like, 30 or 40,000. 30 or 40,000, yeah. And then when I think and I started publishing it, I believe it was 50,000 around there. You know, and that was another thing too. Like, obviously in a perfect world, it'd be awesome to start tracking your net worth when you have money versus you have a loss of money.

You know, because a lot of people won't track it because they don't want to see what the number is if they're in debt, especially with like student loans, for example. Right. you have 50, 60, $100,000 of debt, like, that's not a pretty picture to look at. Now, on the flip side, I always argue, well, that's what it is now, right? Like, it's a fact. Like, there's no changing, you know, right now where you stand. But next month when you go and you're $500 less than the whole, right, that's motivating. Like, every month you see your progress as long as the progress is going up.

Right. And they won't always, I mean, there's months where I've lost, I think the highest was like 40 grand in one month because of the stock market. But then there's months where I was like up 60 grand in one month. And so like it fluctuates when you do it monthly. But even if you just did it quarterly or you, I mean, you track your net worth, Paul. And I believe you said, do you do it quarterly or do you do it every six months? I can't remember.

About every six months. I usually do it once in January and then once sometime in the summer. Okay. So July, August. So yours probably is going up in big chunks every time you do it, right? Yeah, it is. It is. Okay. I'm sure if I tracked it monthly, it would fluctuate quite a bit more. Right. But then the other part of it is that a lot of my net worth happens to be in rental real estate. And that isn't quite as volatile as stocks or index funds. Right. That kind of smooths out the ride a little bit. Yeah. And that's the whole other thing too. Like how do you value a house? You know, do you use Zillow? Do you try Redfin? Do you use a realtor? Like there's so many different ways. Oh, I am a realtor. But I don't use myself. I was a realtor for three months.

Oh, that's right. I remember, I remember reading that. Yeah. Do you still have your license? No, no, no, no. I did it for a few months. I did pretty well. I sold like three homes, maybe even two months.

But I didn't like the constantly being on call 24 hours, nights weekend, like all that stuff. I wasn't a hustler back then. I was doing the bare minimum to like not be in trouble at work and stuff. Yeah. I didn't have the same work ethic. I do now. Yeah, I'm the same way. I only use my license really for myself to buy my own houses. I don't buy. I don't represent other people. Oh, that's nice. You can do referrals too. I remember like I would get clients. I'm like, nope, I'm not doing it. I would just refer. So I did nothing, but then you still get like a cut of

the money. Yeah, yeah. I do. I typically do like, you know, two or three referrals a year. So that's kind of nice. Oh, there you go. That's part of why I maintain my license. But the bigger part of it is just so I can my own houses. At any rate, yeah, back to net worth. Yeah, so there, well, and there's something too, like, so like even like, like, what you put in there and what you don't, right? Like, there's even like, like, some people put, like, baseball card collections in there. You'll either think it's smart or stupid, right?

You have, everyone can do whatever they want to do. But the trick is to be honest with yourself. And if you do include something like that, try and find out, like, realistically what the worth that you'd actually get like in market value. Yeah, I agree. Get an objective opinion. Yeah, like if you think your collection's worth like $10,000 book value because you graded them on and whatnot, right? Right. Realistically, they're probably worth like $3,000, you know, or $2,000 depending on what it is.

But, you know, anyways, these are all things that you consider when you're doing it. But the very first time you do it ever, just stick to the simple. Say, you literally log into your savings, you're checking your investments, log in, copy and paste, put it into a spreadsheet. You know, it'll take, you know, five minutes, 10 minutes. once a month or however you do it, and then you're done. Like, it's real simple once you have it set up. Yeah. And I just spreadsheet. I will say in terms of valuing a house, so the way that I do it, it just kind of with your baseball card analogy, like it's easy to assume that your house is worth more than it actually is because people have emotional attachments to their homes. Yeah. And so that

emotional attachment will lead you to believing that it's worth more than what the market would actually command. So what I do is I'll look at A number of different websites. I'll look at Zillow, Trulia, Redfin. There's one called Homesnap.com that I really like. I'll look at the estimated home value on all of those sites, copy down all of those, and then average them out. That's a good way to do it.

So that way, you know, if one of those estimates is like wildly off, it's, you know, balanced out or averaged out by the others. Right. And because you're only doing it twice a year, it's not that annoying to go to like all four or five sites or whatever. Yeah, yeah, exactly, exactly. So, yeah, so for me, calculating net worth takes a little bit longer because I'm visiting a whole bunch of sites and pulling that data for every single property.

But, you know, that being said, like that time investment is totally worth it. And I do the same thing for my cars as well. I go to Kellybluebook.com, KB.com, look up the value of my car and my car and Wellscar and just copy down whatever the KBB value is. Okay. Yeah, I use KB for mine. And I always do private party because that's how I would actually sell it when I do go to sell it. It will be private party.

Yeah. Because you could pick all the different traded in. Do you sell it to a dealer? Yeah. Yeah, exactly. And then for the home, I did Zillow in the beginning, but man, it would fluctuate every month by like 20,000. Yeah. And I'm like, there's no way in hell, you know, like.

Yeah, that's the problem with the Zillow. Lowe's estimate, it's just sometimes you look at it and sometimes it's just completely way out of left field. Right. So, yeah, so that's why I like using a wide variety of different websites and then just averaging them out, because that way, if one of them is out and left field, I mean, you've at least, like, kind of got a cacophony of opinions that you're balancing out. Another big word.

My Lord, Paula. Putting me to shame. Yeah, I use, oh, yeah, I use a realtor. So, like, I'm friends with the realtor and I said, hey, whenever I go to sell my house, I'm using you. So you can help me every now. So, like, once a year, maybe twice a year, I'll ask him to run comps, like, so they're real market. And then, like, if you were to put this on the market today, what would you put it at? And so he gives me a price.

And I use that since it's, like, real life at least that time. So, and then I don't update it. I just keep it the same for usually a year long. You know, because I don't want to bother him every month and waste his time for nothing. Yeah, yeah, exactly. But yeah, yeah. And I'm trying to think like when my epiphany happened. I think with, I think, well, with net worth, it's cool just to like if you're a financial nerd, it's always fun to track numbers.

But I think you really start getting super motivated, like when things start like building up a little bit. You know, because it's like one thing to like take money out of your paycheck and put it somewhere. And you can see it a little bit over time. But when it starts building up, like I think when I hit 50,000, 60,000, like was it when it really? really like hit me like, wow, like this is money that's only growing because you're not pulling from it. It was mainly like 401k back in the day. Like maybe I had like a thousand dollars in savings, but most of it was 401k money. And I would just keep putting it in and getting matches. And so I think maybe let's say I was at like 5% 401K for a few years or whatever. Once I started

seeing it build fast, my mindset changed because I was like, all right, well here's like my financial picture, like, what can I work on to, like, make it go up faster, right? Which would never have happened if it was just in my brain, you know? And so I look at the categories, do I want to, like, spend less than these? No, I'm having fun partying and I don't want to, you know, my lifestyle to date. You know, do, is there like some tricks I'm missing? Well, I'm matching the 401k, what my employer's doing, you know, or matching. And so I kept thinking about this. And around the same time, I kind of switched jobs. And when I switched jobs, the company I was at, which is crazy. I mean, it's crazy. Even thinking about it to this day, they would match 100% of 100% that you put in. No vesting or anything.

That is nuts, dude. You got like hooked up with that. Yeah. And so, and it's not even like, oh, it's 100% up to 6%. It's like you put in, I think at the time I was like 15,000 or 16,000 a year. You put in 16,000 and we'll match 16,000. Which like blew my amount. In the beginning, I didn't do anything. I'm like, well, I'm not going to put like $16,000. I'm only making like $40,000 or whatever, you know, 50,000, whatever it was. Like, that's a big chunk of money.

But when I saw the net worth and I was like, you know what? I was like, if I did do this, that would be pretty huge. So the first two years, I figured, and I started blogging and I started hustling on the side. So I had more income coming in. And I said, you know what? Screw it. I'm doing it. So I jacked my percentage.

I did the max. I think it was like 94%. of my paycheck went directly to 401k until I hit the legal max. So for like two or three months and at my mask, I'm trying to like remember it was like six years ago. So it might be a little off. But like my paycheck was like $19 every two weeks. I would totally do the same. If I had an employer that was giving that was matching dollar for. I mean, that is the only guaranteed return in the world of finance when an employer matches your retirement contributions. It's free money.

It's crazy, isn't it? Really, it's money that you've worked for, but it's like a portion of your compensation that's getting withheld unless you do this one specific thing. Yeah, but those matches like, I mean, it's just, I can't like, I don't know, so I got really lucky in that department and then I took advantage, but here's a crazy thing. Let's say there, I think there's like 15 people that worked at this company. there was only two of us, myself included, that maxed out every year. Yeah, that is nuts, dude.

Yeah, and some would even put in like four or five percent. They're like, well, no, I need that like 50 bucks or whatever. So they got nothing. They didn't put, I mean, I just blew my mind. Now, on the flip side, I think our company got a little crazy what they're spending. And eventually the company went under. So I might have been a part of that. But, you know, I could get into the situation when it occurred.

Jay Money, crashing companies left and right. Yeah. And actually it's a little less because they never paid me at my last paycheck. They ran out of money. But you know, you can't complain. But yeah, so if you're like the first tip, I always tell you to be like, track your net worth and then like figure out what your company's matching. At least put the amount of your 401k, you know, whatever the percentage is to get the free money that they're giving you just for investing, which you should be doing anyways. Yeah, yeah, yeah.

And I, well, and I think that speaks to the benefit of tracking your net. net worth because for the listeners who are wondering, like, why should I bother tracking my net worth? It seems like just another chore. You know, I have to, I have enough chores already. I have to scrub the inside of my oven. Why should I add this to the list? Right. Yeah, I think this perfectly illustrates why you would because when you, when you have that

visual, it guides your behavior. It makes you do different things. Yeah, the visual is really big. And it's like, and it's a goal too. So it started off with like, oh, I want to try and. be a millionaire. Like, that's what most people do when they think about money. Right. And it's still, like, to the degree, yeah, like that interests me. But after a couple years, especially last years, I'm like, you know what, I don't care if I'm a millionaire or not a millionaire as long.

Or half a millionaire. Yeah, honestly, I don't really care either way. As long as my lifestyle's awesome. And eventually, I'm going to be, like, quote, financially free. Because some people can live off half a million for the rest of their life, right? Some people do that. I mean, most of the people in the world live off of less. Right. Yeah. I mean, Mr. Money Mustache had $800,000 when he retired. Oh, I didn't know that. Yeah. So your number is pretty close to his. Yeah. And I'm way, my expenses are so much higher than his. For the listeners who aren't familiar, Mr. Money Mustash is a blogger who basically saved up a net worth of $800,000 and then retired on that. Four hundred thousand of that was a paid off house. And then the other $400,000 was investments. So anyway, just

thought I'd throw that out there for the listeners who are like, who are they talking about money who? Yes, good, good call. Very small. So, sorry, go on, Jay. Oh, no. Well, so I was just saying so like, yeah, so it's visual. Your net worth is a visual because you physically see it. But if that doesn't excite you, which I don't know why I wouldn't excite you, but if it didn't, there's other things you could track that might be more like a goal oriented or a point, right? Because with the, tell me, tell me. What should I track? Yeah. With the net worth, right, like the goal is, well, I just want it to be higher. Right.

And you can say, well, I'm going for half a million or a million or 100,000 or 10,000 or breaking even, which is still a damn good goal. Yeah. For me, the point of money, and we've talked about this before, but it is to be free, freedom to not have to make money ever again if you don't want to. Right. So especially the last few years of this whole early retirement, you know, wave coming on and getting starting to take up popularity, which is cool, especially online.

But you can track like using part of your network. So you still need to know your investments and your savings and all this stuff. But you can put it into a spreadsheet and find out like, hey, at this rate that I'm saving with this estimated return, I could quit my job forever in 10 years and three months. And I have a spreadsheet on my site, Budgets Aresexy.com. There's plenty of, I mean, there's dozens, hundreds of them online that you could find. But pretty much you use the same kind of info, plug it in and it'll tell you, hey, like right now for you to retire, this is like how much. you have to survive, let's say it's 500 a month, right? If you can retire off a 500, if you only need $500 a month to live, then technically you could retire now, you know,

in a very simplified, you know, way. For me, the number that I need at my current spending rate is around like $1.7 million. So yeah, I'm at half a million. Yes, it would be awesome to say I'm a millionaire, you know, on a hit a million. But the ultimate goal for me is to be financially free. Hey, so you're one third of the way there. I'm one third. the way there. Yes, yes. And I'm halfway to 64 or whatever. That doesn't sound good. Right. But you know, the first half a million is always the hardest. That's what they say. Yes. No, it's true, though. Like, getting from the acceleration, the momentum picks up. That expression like it takes money to make money. It's kind of true. Yes. The first hundred thousand is freaking hard. I was like,

about to curse, but I'm afraid. Well, Anne is most rewarding when you hit. Like, I remember hitting 100 and that was, that was, like, I was more excited to hit 100 than I was two or three, four, even 500, probably. Because your mind is still changing and you're still grasping the concept of money and trying to figure it all out. Once you kind of know the basics, which is awesome because then you have it for the rest of your life.

Like, it's not really new or exciting. It's just like, well, this is my plan. Right. So in the beginning stages, yeah, in theory, you should be a lot more. motivated and exciting to get going and start watching the climb happen. Right. But yeah, you know, and if this stuff does, just go check out the net worth tracker. I mean, there's 180 bloggers on it from all different places, actually places in the world.

Some are married, some aren't. There's like too many variables to really compare. But you can at least figure out like, hey, like these people are around my same position. And then you can follow their blogs and their stores because you might be able to relate more to it. So where is this net worth tracker? Oh, it's at rockstarfinance.com. And then there's a link called like Ultimate Network Tracker or something like that. Yeah.

And even for me, like I still feel like I'm a newbie with money in my head. Like you know when you like leave college but you still feel like you're a college kid? Yeah. Yeah. Like I still feel like I'm new on the scene and I'm tracking my N-worth and there's people that email me say look like I don't really relate because I'm not at that stage so I can't follow your blog anymore. Right. And it's crazy because I still think of myself as like in the very beginning.

beginning stages of everything. Right. You know, so, so if you don't follow, if, you know, if my situation doesn't relate to you because now I'm married with kids, right? Like, I'm not a crazy partier, fun guy like I used to be. You know, you can see other people that are more around your, you know, your phase of life, I guess I should say. Yeah, it's fun. Cool. It's awesome. Well, I think that's probably around it for net worthing. You didn't let me ask you any questions. Oh, dude. Have I, all right. Okay. I'm in the hot seat. You haven't published your net worth. I won't ask you what it is because I don't know if you're ready. Yeah, I just don't want to. It's funny, the numbers that I am and am not comfortable disclosing, like when it comes to real

estate, I'm super comfortable disclosing all of my real estate numbers. And I think that's, it's partially because if you really wanted to figure it out, you could. Like the, it started with me disclosing the price at which I bought all of my homes. So for the listeners who aren't familiar with me, I own a total of six homes, one of which is my primary residence, five of which are rental properties. And so I've got those five rental properties. There are seven units within that because one of them's a triplex. So it started when I bought the triplex. That was the first number that I ever publicly disclosed. And I did it because, frankly, it's public record. If you looked up the address, you could see what that house sold for. That was my thinking at the time was,

I'm not really telling you anything that you couldn't go figure out yourself, because this is all public record anyway. And then after that, I was like, well, okay, I may as well disclose what the rent is because if you were really wanting to sluth, you could probably go on Craig's list or like look up the ads for renting the home and figure out what the rent was. So then I disclosed that number. And then I was like, well, okay, if I'm going to disclose what I bought the house for and what it rents for, I may as well just go all the way and, like, publicly post every single number that relates to real estate. So at this point, now, I post screenshots from my bookkeeping software, where I'm like, this is the income, these are the expenses, you know, this is how much we spent

on pest control, this is how much we spent on refinishing the floors, you know, and this is how it all shakes out. These are the returns. I guess, uh, real estate. estate was my gateway into public disclosure. It's like the gateway drug of public disclosure. Right. So at this point, I'm super comfortable disclosing my real estate numbers. But when it comes to all, like, I run a business and that is still just weird for me to kind of disclose. And I think partially it's because I guess I'm a little bit worried, like, are people not going to get it? Are people going to be like, oh, you're a show. You're just in it for the money. Right.

At one point, I started a really quick tangent, but I promise it relates to this conversation. Like, at one point, I started offering, so a lot of people were emailing me, and they were emailing me these really complex questions. They were like, here's a spreadsheet where I've analyzed five different rental properties. Could you please study this for the next two hours and then let me know what your assessment is on which property I should buy? And I'm like, no, no, I can't do that because to actually do a good job of that would take a couple of hours. That's not something that I'm going to casually do. Right. And so at that point, just in response to the fact that I was getting all of those demands, I didn't want to say no.

I wanted to say yes and, you know. Okay. And so I set up coaching calls. And there's a link on my website. It's called Pick My Brain. It basically says, hey, you know, if you want to pick my brain. train. Sure, there are ways that you can do that. I've listed how to do it like categorized in order from free to most expensive. Okay.

You know? And then at the free level, it's like I've written more than 300 at this point, almost 400 articles on this blog. They're all free. Read those. Join the email list. That's free. You know, listen to the podcast. That's free. Well, that takes time, Paula. I don't have time. You know, and then I go through all these different options. And at the very, very end of the list, I'm like, if after. exhausting all of that, you still want personalized, individualized attention. Here's a link to a website where you can schedule a call with me. And the charge for that is going to be $200 an hour because frankly, that's what my time is worth. Because it's not just that hour that I'm spending with you. Like when a person books a call with me, I email them and say, hey, send me any information that you want me to review prior to the call, you know, so that I can look over that

information. So then I'll look over that and I'll spend some time thinking about it and jotting down notes and jotting down ideas of what we want to talk about. And then we get on the call and the call like it interrupts my day. It interrupts my workflow. I have to plan around it. And frankly, that's just what my time is worth. Right. And it's emotionally draining because you're spending a lot of time trying to help someone and making sure like you're going over stuff. You're not misleading them and you're giving them ideas. It takes a lot of creative and emotional juice out of it. Exactly. Exactly. Those are high value hours. So like, yeah, there are 24 hours in a day, but not all hours are created equal. I probably have about maybe probably six to eight really good high value hours in any given day, you know.

And so I have to treat those hours judiciously. But anyway, the point of all of this is that when I put that out there, I got flack from a couple of readers who were like, how can you claim to want to help people when you're charging them? money. Right. I know. And, you know, my response is like, well, how can a doctor claim to want to help when he gets paid for his work? What about your lawyer? What about your accountant? What about your hairdresser? How can your hairdresser claim to want to give you better hair when she charges you money? Or he charges you money? So, like, you know, why am I expected to work for free when you would pay your your hairdresser or your barber or your, you know. But, you know, people don't get it. Like when people see that you have a blog, unfortunately, blogging is still seen as like one of

those things that people should do for free. And so that's partially why I don't disclose my income is because I just don't want to deal with like whiners and complainers like that who are like, wow. Right. I can't believe you don't work 40 hours a week and cover all of the costs associated with running a blog for free. Right. Well, and you are not anonymous like me.

So your name is out there, pictures out there a lot more. Yeah. So that's the, yeah, so there's definitely publicly putting it out there. There's lots of pros and cons to think about. It doesn't affect the majority of people who aren't online.

You know, but that's true. So let's take your real estate then. Let's say we are going to do a net worth of your real estate, like a simple, easy example, right? So you have the six homes.

And in this spreadsheet or whatever, you can even literally write down. You put like home number one. Estim value is X,000. Yep. You go down. So now you have like six rows of houses. Yeah.

I name them by the street that they're on. All right. Perfect. Yep. And then, you know, there's a divider and it's like, all right, now time to get to the mortgages. And I know some you have mortgages, some you paid fully cash because you're a rock star. You know, and then the net worth of your real estate would pretty much be all the values added, subtracted by the debts, right? Exactly.

Yeah, the value of the home minus what I owe on it. Okay. So what? And by the way, so this real estate net worth, I mean, anyone could do this too, but there's people that will do this just for investing or my dividends, like what my dividend net worth is because that's to them what the money they'd actually pull from to retire. Right. So you can use this for a number of different things.

But anyways, what is Paula Pan? Do you know what the number is off your head or do you have to like calculate? Like what your average? I would have to figure that out. I know what my gross, because I, I'd most. mostly like the number I focus on is cash flow. Cash flow. So.

And that's way different than net worth too. Right. Okay. So what's your cash flow then so we can get some juicy nugget out of you? So last month I earned gross revenue was just shy of $10,000 in rental income. Okay. Mine before expenses. I think it was like, yeah, exactly.

So that is just the top line income, not counting any of the. expenses. It was, I think, here, let me pull it up, $9,676.87. And so that was in October of 2015, which at the time that we're recording this is the last month. In that month, the cost of paying all of the mortgages was $3,524. Nice. And $83. Okay. And this is unusual. In that particular month, we didn't really have any other expenses. We had $50 in repairs and that was it. And that is not usual. That's not typical. Don't expect, you know, that we've had months where we run into the negatives. But it just so happens that last October 2015, the only thing that we had to pay was the cost of paying the mortgages and that was it. And so the net income after that was the cash. And by net income, I mean the cash that hit our bank account, the cash that stayed in our bank account after we paid the bills was $6,102.

Okay. And $0.84. So you made $6,000 in profit out of your real estate empire for a single month. So you pretty much, that's like a $30, what, $0.72. thousand dollar your job career like if you're getting a paycheck well it would be if that were if i was consistently getting 6,000 every month okay gotcha but you know which i'm not there's there are some months where i'll be made where i'll make a profit of 6,000 there are i'd say most months i make a profit of around 4,000 between 3 to 4,000 okay which is still awesome yeah so okay you know that's your

cash flow yeah and then There are some months when we have $6,000 in expenses, so the profits go to zero. Right, right, right. Okay. So I guess it doesn't help us with the net worth part. Because you can have a net worth. Like, I've had months where my net worth has gone up like 20 grand. But like I like lost like 5,000 of cash because of whatever reason in my life.

So like cash flow and your network don't go, even though they're both awesome to know. Tell you what, I'm opening up Dropbox right now. and I'm going to pull up my last net worth statement so that I can read out the real estate numbers from it. You're out the wrong number. Yeah. Get the bottom, the number all the way at the bottom after all the people. And so you have real estate. You don't have to give the amounts or percentage of anything, but you also have, I assume, savings, investing.

Yeah. IRAs, HSAs, probably. Yes, I do. So in addition to real estate, I have a 401K. I have a Roth solo 401K. So it's a 401k that's taxed as a Roth account, which means I contribute after tax dollars to it. I have some Roth IRAs. I have one traditional IRA as well with just, it's got like five grand and it's not much.

That's still good. Better than zero. I've got, let's see, Will has a simple IRA. and then we have some money in traditional, traditional taxable brokerage accounts, some money in savings accounts. So you have money all over the place. Yeah. But would you say, can you give us this, that your real estate empire in terms of just net worth, does that, or maybe you don't want to say, is that what percent, like, is that big compared to the rest total? Is it just, you know, I know, I know whatever you give, I don't want to accidentally get.

give away your net worth. But I would imagine it's a sizable chunk, at least. We could say that. It is. Yeah. Real estate is a, because if I give percentages and then I tell you what the real estate is, then you can easily calculate. Okay. So we'll leave it up to our imagination. And maybe one day, it'll slip and you'll be okay. But for now, it's no go. But here's what I will tell you about the value of all the real estate that I have. Okay. Six homes. Yeah. The last time I updated was in June at 2015. Okay. So the numbers are current as of June 2015.

Okay. Actually, we bought the home that I live in right now in July, so that home isn't included on here. But I'll say that this home that we bought, I may as well just tell you, the cost of this home was $440,000. Okay. And we made a down payment of approximately $100,000. Okay.

And we just bought it a couple of months ago. So that's how much equity we have in it. So the net worth of your house, if you're simplifying it even more, is 400,000 in assets, 300,000 in debt because you paid off, because you put down 100,000. 340,000 in debt, yeah. Okay, yeah, which gives you 100,000. So your net worth of that one home in this exercise is worth 100,000. Exactly.

My equity in this home is roughly around 100,000. Okay. And that's not on the spreadsheet. I have to, because this spreadsheet was made before we bought the place. Okay. So in terms of the rental properties, I've got five buildings, the triplex. You better not make us do a bunch of math right now. You should say, go down all the numbers and then tell us if it's easy for you to calculate the total.

So it would be easier. Okay. I can totally do that. I can totally do that. I was just going to jump to the total. Oh, okay. Yeah, do that. All right.

So rattle them off fast and then do the total. Okay, cool. All right, Triplex is worth 454,000. I'm just rounding to the nearest thousand, all right? Triplex is worth 454,000 currently. House number two is worth 94,000. House number three is worth 146,000. House number four is worth 172,000.

And house number five is worth 68,000. So you are close to a million dollars, 900 something. 935,391. Okay. Now your net worth is it 900,000 because you owe on some of these. That is correct. Although it would be awesome. Not counting the house that I live in now, only counting those five rental properties that I just named off.

That's right. The value of those, the assets of those five rental properties is 935,391. the liabilities on those five properties, which means the amount that I owe in mortgages, comes to 477,659. Nice. And so the equity that I have in those rental properties is 457,732. So you're net worth of your empire, because if you add in the new one, you're at like $1.3 million, then you're at $100. So you're over half a million dollars net worth only in your real estate empire. Yeah.

So I hold about, I guess, including my primary residence, I hold about roughly around $560,000 in equity. And those homes give you the cash flow that you mentioned before of, let's say, $5,000 a month, $4,000 a month. Right. Well, not my primary residence. Oh, yeah. The five other houses do.

So like where my real my net worth is mostly in investments and index funds and I get dividends, but I don't get like six, I don't know. Actually, I don't even pay attention all the way. It gets good money, thousands, but not four or five thousand a month. So that gives you a good example too of how to net worse, roughly the same can be drastically different and what's invested in there. Right. Right. Exactly. Yeah, because I'm making four thousand like based on having. So let's let's for the sake of conversation. Let's factor out my primary residence entirely. Let's just ignore that and focus only on the rental properties. I have just shy of $460,000 in equity on those rental properties. So actually, Jay, you and I have, I guess, similar numbers in that regard. Yes. Although mine's all the money I own in my whole life, plus a little of my wife, versus your one section of your network.

But yes, you're accurate. Yes, good job. And so, yeah, so from $460,000 worth of equity that I hold, I'm making between $3,000 to $4,000 per month in profit from that. Yeah, and over time, so this is where the personalities and what you're comfortable with play, because at some point you're going to have everything paid off. So let's just say it's a million dollars worth now of property. let's say in 10 years or 15 years or 20 years, you have no debt so you don't know anything,

plus your property value probably went up. I don't know. Let's say it's now like $1.5 million. So now you're holding $1.5 million worth of real estate plus your $4,000 in the month income might be like $6,000 now by the time, you're 7 or 8 or whatever it is, right? And there's inflation and all that stuff. But the point is at some point,

you're going to have a whole massive amount of real estate property slash equity and a monthly, quote, passive income, even though it's not passive all the way, coming in. And then you, so that's one way. And then you look at mine, I don't, so the only positive in my view of the difference between yours and mine is I don't do jack shit. It's just in the stock. I do nothing.

No phone calls, no real estate, nothing, right? Which is the reason why I do it, you know, because real estate to me, I mean, it's just so hard for me. So anyway, so if you put me up 10, 15, 20 years, the difference would be my investments would have grown and I would have got dividends, but there's no like, there's no, I mean, there's no, I mean, there's no borough property and there's no thousands of cash flow, right? Right. So the advantage that you have, Jay, is that your assets, so there's like two ways the assets grow, right? There's the appreciation, which means growth of the value

of the asset itself. And then there's cash flow, which could be dividends or net rental income. So the assets that I hold are geared towards the second option. They're geared towards cash flow. They are kind of analogous to a dividend, a very dividend-based investment in the stock world, in the equities world. But they're not, the houses themselves, the value of the houses, are historically speaking, not going to appreciate more than the rate of inflation.

Any appreciation that's happened on them as we're coming out of the recession has already happened. I really don't expect their values to grow any more beyond just keeping pace with inflation, and that's it. Okay. Well, that makes me feel a little bit better. So basically you, by virtue of investing in total stock market index funds, you've made a strong capital appreciation play, whereas I've made a cash flow play. And that, I think, is the main difference between our two strategies. And at the end of the day, while you're already financially free because of how you've set up your stuff, I am not, but let's say I was,

or at one point if this podcast is down the road and we're both at the same financially free part, two different ways that you can get there based on what you're good at, what you like, what you're comfortable with, which is the beauty for me with money stuff, right? Because you get like that whole debate of, I mean, we've had it, right? What's better? Earn more. Spend less. Hustle more. There's so many different variables that go into it. The trick is figuring out what you're good at and what you actually like, you know, because there are things. I will not like buy investment properties and manage them for a living, even if I was like, I mean, I guess if I was making millions, I would do it.

But that's not a path. I would choose a slower path to financial freedom as long as I was enjoying my every day. So these are all things that anyone has to consider when they're trying to think, oh, how should I grow my wealth today? There's pros and cons to everything. But that's what I like about our team here is that we come at at different ways. And hopefully the listener can see which ones they like or don't like and maybe help

them get a little closer. Absolutely. And that's the thing is there's no right or right. wrong way to manage your finances as long as your net worth is growing. And that's really, ultimately, what it comes down to is your net worth growing? Yes. In a capacity where you're also managing risk, you know? Yes. And that goes back to the whole point of tracking your net worth too, right? Like some people, again, like if you're in debt, like, why do I track my net worth? Right. But that's the beauty. Like, if you pay off debt or you earn an extra thousand, right? Let's say you

paid off a debt of a thousand or you earned a thousand extra and you saved it like your net worth still goes up by a thousand it doesn't matter what section of the of the spreadsheet it's in it still increases you right and again that's the whole thing if you had a thousand dollars in debt and zero investments and someone gave you a thousand dollars what would you choose would you invest a thousand or would you pay off your debt and have the even even right you know i if i had a thousand dollars and let's say credit card debt and someone gave me a grand, you know, I'd probably pay off the debt because it's annoying. Right.

But I know people that are like, no, screw that. Like my debt on my credit card is like 6% and I can make 10% in investment. So financially speaking, that's better and that's the play they go. But they have that goal. So the thing with, again, going back to the net worth is any play that you make that's positive, it doesn't matter if it's in the debt or the asset column, it'll increase your net worth and push it higher. And that's what you want to track.

track your progress. Again, some days you'll fail and it'll go down, but you just want to track it and make sure that you're on the right path. Absolutely. Love Net Worth Talk. I don't want this podcast to go into two and a half hours. And since you're not going to divulge any more of your juicy stuff, like, there's no point to talking anymore, Paula. I feel like it's weird to read out numbers in a audio format because I know that there are people who are listening who are like driving in their cars and a numbers when you're speaking them out loud are so hard to visualize that it's like 8,6, 7, 5, 309. Yes, it is really.

But yeah, I mean, that's the story. That's a good story today. So now you all know, my real estate is valid, the rental real estate specifically when you factor out my primary residence. Rental real estate is worth just shy of a million. and it's probably about a million right now because it's been a while since I last tracked that, since I last updated that spreadsheet. But it's worth like, you know, a million or just a little shy of that. And really half of that is equity and the other half is debt. So I'm at about the 50-50 mark in terms of what I own versus what I owe on all of that real estate.

You're doing good. You're growing the little empire. Awesome, guys. Well, thanks for listening. You know, if you do have these in-depth questions, I mean, there's nothing saying that we can't talk about them on the podcast and maybe have question day or something free of charge. Right. So send him the questions or email us and, yeah, maybe we'll go that route.

Cool. Cool. All right, Paula P. All right. All right, everyone listening. Keep doing good. Bye, Jay Money. All right.

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