Afford Anything - The Latte Factor, with author David Bach

Episode Date: May 6, 2019

#192: “Don’t buy lattes.” This classic snippet of personal finance advice isn’t specifically anti-Starbucks. “Lattes” are a metaphor for the tiny expenses that leak money from our pockets, often without us realizing how much we’re spending. Your “latte” could be a pile of subscriptions: HBONow, YouTube Red, Spotify Premium, Netflix, Hulu Plus, the CostCo membership that you haven’t used in two years, and -- for that matter -- the gym membership that you also haven’t used in two years. (Ahem.) Your “latte” could be buying bottled water and snacks at the airport, or absentmindedly shopping online when you’re bored, or ordering restaurant take-out or delivery too often. Your “latte” might be spending too much on trinkets and souvenirs during your vacations, when photographs would capture the memory. David Bach is the New York Times bestselling author who created the phrase “don’t buy lattes.” He joins us on today’s podcast episode to discuss The Latte Factor. For more information, visit the show notes at https://affordanything.com/episode192  Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else, and that doesn't just apply to your money. It applies to your time, focus, energy, attention, anything in your life that's a scarce or limited resource. And so the questions become twofold. Number one, what matters most to you? How do you direct those limited resources in a way that reflects your highest priorities?

Number two, how do you actually execute this on a day-to-day basis? Answering these two questions is a lifetime. practice. There are no simple answers. That's what this podcast is here to explore. My name is Paula Pan. I'm the host of the Afford Anything podcast. And today, David Bach joins us to talk about the latte factor. If you've ever heard the expression, don't buy lattes, David Bach's the guy who came up with that. His books have sold more than seven million copies. He's written nine consecutive New York Times bestsellers, two of which hit the number one spot on the New York Times bestseller list. That's the automatic millionaire and start late, finish rich.

He's got loads of enthusiasm and insight for helping people save money. So let's hear from him right now. Here's David Bach. Hi, David. Well, hello, Paul. It's great to be with you again. Thank you so much. It's great to talk to you again, too.

David, you've got this new book, The Latte Factor, and this is totally different than anything you've written. This is a fiction story about Zoe and her adventures in learning about money. How did this come up? about? You said you've been thinking about this for 10 years. Yeah, well, I think you brought, we met at FinCon, right? If FinCon was at 2017, I talked on the stage about how I was working on this book, and I talked about the latte factor. And this is my 13th book, but what's different about this book than any of the other books I've ever written, you know, a lot of people know me for like the automatic

millionaire or smart women finish rich or smart couples finish rich. I've always written how to motivational books. And I really reached a point where I thought, you know, how can I reach more people, right? Like, how do I reach people that wouldn't normally read a financial book? Starting with my own teenage son, who's Jack, who's 15, you know, there's just this huge demographic of like young people that need to know how to be smarter with money, need to know how to reach financial freedom, need to know how to go for their dreams. How could I reach them? I've always been inspired by writers who have written, stories, parables. And some of my favorite books, one of them is The Alchemist, written by Paulo Coelho. I loved Paulo's book. And I also was very moved by another book, who moved my cheese,

written by Spencer Johnson. I just found that over the last, you know, 30 years of my life, I've been really personally moved by short little stories. And so I had this dream, really, ever since I went on Oprah, well over 10 years ago with the automatic millionaire, to write a little story that could be read all over the world that would translate. And I had the unique, amazing experience that in 2012, I got to go to Geneva and meet my writer hero, which was Paulo Coelho. So I was with Paulo. We had dinner. We had drinks. We were up all night. And he finally looked at me and he said, David, what is the book that your soul dreams of writing that you haven't written yet? I looked at Paulo in this little dark bar and I said, you know, Paulo, I have this dream to write this little book

called The Latte Factor that will feature this young woman named Zoe Daniels. She'll go on this journey where she learns that she's richer than she thinks. And I want to take this little story and inspire millions of people all over the world to realize they can't, don't give up hope. There's really an opportunity for you to change your whole life and it can start with a few dollars a day. And he looked at me and he said, then David, you got to go write that book. I came home from Geneva. and my wife said to me, well, so I know you flew all the way to have dinner with Paula Coel. What did Paulo say? And I said, he said, I should write the book. And she laughed at me. And she said, well, I've been telling you you should write that book for 10 years. So, you know, a lot of times

writers, we have ideas, but we don't always get right to the idea. And I, truthfully, Paul, I didn't have the whole idea. And then one day the idea, like, it came to me, Zoe Daniels. This story about this young woman who's 27 years old, she's a millennial, she's living paycheck to paycheck. She's been in New York for six years. She's got her dream job, but she's not getting ahead financially, and she's starting to give up hope. And so we started working on it. We've been working on it.

It's already now been three years. We've worked on writing it for two years. Now we've been working on the marketing plan for the last six months. And in a matter of days, I don't know when you'll air the podcast, but a matter of days, this book will be out in the world. This book comes out May 7th. And so we'll be sharing it everywhere and doing a national tour. and then I'm going to go live in Italy for a year and try to bring the message all over Europe.

So many, many follow-up questions to come out of that. But the first one, you knew back in 2012 that her name would be Zoe Daniels? Why that name? No, I didn't have the name. What I knew is I wanted the main character of this book to be a young woman. I've been teaching about the metaphor of the latte factor that small amounts of money can change your whole life and teaching the miracle of compound interest through this metaphor for over two days. decades. And the original woman that the story was, you know, where I got the latte factor was from a young woman. It was a woman named Kim sitting in a classroom with me,

telling me she couldn't save any money. She couldn't, she couldn't pay herself for her. She couldn't use her, she wasn't using her 401k plan. She was living paycheck to paycheck. And, you know, she could never do these things. And so I always wanted the main character of the story to be a young woman like Kim. And that's who Zoe Daniels is. She's your average millennial who's working really hard, who's super smart, but has student debt. She's living in, she lives in Brooklyn and she commutes to New York City and she works in the Freedom Tower. And she's a writer for travel magazine. She's an editor, actually. But she never gets to travel because all she's doing is working. Her whole dream was to travel and she doesn't even have a

passport. She's not even been out of the country. The story evolves because the mission is we want inspire, I want to inspire the next generation to save and invest. I want to free people. I want to help free people. Like when you talk about on your website being purpose driven, my whole thing's always been it's about figuring out what your purpose in life is and realizing that money is just a tool to free you to go live your purpose. So I just want to help inspire a whole new generation to realize that this is possible. They can go live their dreams. In the story of Zoe, you talk about three secrets. Pay yourself first, make it automatic and live rich now. Can we walk through those?

Totally. So, you know, the most important, one of the most important lessons that Zoe learns in this book, she learns it from one of her mentors is a gentleman named Henry, and he's a barista. He works in a coffee shop. This idea that the only way to really build wealth is to pay yourself first. And most people are taught the wrong way, which is that you should have budget or you should have a discipline. You should be motivated, right?

Like, it's all in your mind. And the thing is that motivation wears off. off. Most people hate budgets. Most people are too busy to budget. If they even create a budget, they don't stick to the budget. If they're married, then they have a budget, they fight over the budget. And so what Zoe learns is that the way real people in America, like ordinary people, have become millionaires and become financially free, is that they've become financially selfish. She's actually taught to become financially selfish, which is a positive thing. She's taught the first person who should be paid when you're in a paycheck is you. The only person you should

every budget for yourself, right? Like the first thing that happens with money is that when money comes in, the first person needs to flow to is you before you pay your mortgage or your rent or your credit card bills or your insurance. And so it's a completely different way of thinking. And her mentor walks her through this. And he shows her how like, you know, the average person will work 90,000 hours over their lifetime and have very little to show for it. Like the average baby boomer has less than $50,000 in savings right now. one out of two Americans have less than $400 set aside in case of emergency purposes right now. That's a federal reserve statistic, a little over 40% of America, almost one and two Americans, can't get the hands on $400 in case of emergency.

And she learns these statistics and she's one of these people, right? Like she doesn't have a couple thousand dollars in savings, even though she's making pretty good money. And so he starts to teach her how to think about her money and her life different. differently. And he drills into her the message you pay yourself first. And that mind shift for her begins to change the whole way she looks at her life. Right. And you use the metaphor of a clock and breaking down in an eight hour workday, this slice goes to taxes, this slice goes to necessities, this slice goes to discretionary income. But what hour of that day do you spend actually creating money for yourself? Exactly. And he teaches her that the secret.

is to save one hour a day of your income. That really is the formula that if you're in your 20s or your 30s and you're listening to this right now and you save one hour day of your income and you have a job, you have a 401k plan, you save one hour or day of your income. It actually comes to 12 and a half percent of your gross income. And then most companies, if they have a 401k plan, they have a match and that match is usually three or four percent. So when I get somebody who's young to go save one hour day of their income, often they're now saving 16% of their gross income, automatically paying themselves first into a deductible retirement account. And that becomes a game changer. And again, through this little story, because you can read this book in less

than 90 minutes, and the latte factor, she learns that this is actually the same formula that lots of people have become millioners using. And that's the amazing thing. Like every couple quarters Fidelity, who runs the largest 4-1K plan in America, puts out their latest statistic on how many millionaires they have in their 401k plan. It's almost up to 200,000 people. And the savings rate of those ordinary people who become millionaires is right around 14%, not including the match. And so, again, but when I share with somebody, you should save 14% of their income,

it blows their mind away. When you say you should save one hour a day of your income, well, why wouldn't you save the first hour of day of your income, right? And the fact that the average American doesn't even save 15 minutes a day of their income is another point that gets made in this book. And it's just highlighted so beautifully that anyone can get it. My 15-year-old read this book cover to cover. And at the end of two hours, it turned to me, and there's a chart in the back of the book that shows what happens when you open up a small IRA account, just a $2,000 IRA account. And how that's $5.41 a day.

and then it shows how like if somebody starts doing that at 19, he only does it until the age of 26 and never saves another dollar that they can have a million dollars by the time they reach 65. And he looked at me and he goes, dad, I'm only, I'm 15. What would happen if I started at 15? And the answer would be, by the way, he'll be a multimillionaire. And he looked at me, he's like, well, how do I get one of these accounts? I want to do this, dad.

Right? And so like he was able to read this little book in a couple hours and at 15 go, I need to be doing this, right? And that's the message for so many people. And even if you're not young, it's never too late. You just have to get started. Right. So what do you do when you have multiple options that you're choosing between, all of which would result in a higher net worth? So for example, if you're trying to decide how to divert your income between saving for retirement, paying off student loans, saving for a down payment on a home. And we see this in the book where Zoe, you know, she travels to foreign countries and buys a duplex and holds student loans. How do you think through decisions about how to allocate your spending when there is a direct trade. off between multiple positive options. Yeah, it's a really good question. And it's complicated, right? So, like, let's go with the issue of debt. Debt always comes down to what's the debt costing you? Is it cheap debt? Is it expensive debt? So what I teach, and I've done this with other books, like the automatic millionaire, is I teach a formula where you automate all your

savings into different buckets, really baskets. So you've got a retirement basket. And a certain amount of money goes into that retirement account. And you might be working on building an emergency account and your goal, let's just say it's $1,000. So you start by getting an emergency account set up and you automatically move money into that account every month for an emergency purposes. Then you automatically move money towards debt. If someone says, well, I can't do an hour a day of my income and do those other things. Well, then maybe what you're doing is 20 minutes towards a retirement account and 20 minutes towards a security account and 20 minutes towards the debt. it's personal for each person because it's actually personal.

Right? So it's hard to give a generic answer to that because everybody's situation is different. But I can tell you that the fastest way to fix your finances is with the debt, get the rates lowered as fast as you possibly can. Stop digging a hole. So if you're somebody who's using credit cards to buy things, stop using those credit cards. you don't want to wait to pay off your debt to start saving. That's the biggest thing we see people doing where like, well, I've got student loans. I'm going to pay my student loans off first and then start paying myself first. And what I tell young people especially is like if you do that, you'll wait until you're 40 to even start saving. You'll be so far behind. If someone says, I know, I know you got into the game of buying real estate and that you prioritize that, right? And that's what helped you become free financially. I'm a huge proponent of buying real estate. I'm a huge proponent of buying real estate. And, and that you prioritize that. And that's what helped you become free financially. I'm a huge proponent of buying. buying real estate. So someone says to me, well, you know, I'd rather save money to buy real estate. Well, great. Then saving money automatically to buy real estate, that's a pay yourself

first account. I still would like to see you use an IRA account. But my whole thing is, I want you to build assets because it's assets that provide income. And assets that provide income, provide freedom. That's the whole key. Assuming that the interest rate on your loans are not too high then. I guess what I'm hearing is that buying assets might take a higher priority than paying off reasonable liabilities. Completely. And that could even go as far as with a person who's got credit card debt. Someone says to me, I've got $10,000 in credit card debt, but my rate's zero right now. Well, then good. Then you can make extra payments on your credit card, but you're paying the principal down. If someone says I've got 20% in your credit card, should I pay those off first and

then start paying myself first? No, you shouldn't. You should take half the amount of money, whatever you've got and half should go towards paying yourself first and half should go towards debt. And I get asked, well, why? Why when I pay all the debt off first if the rates higher on my debt that would make in the market? The answer is because it's a habit. And so I want to shrink your debt and also increase your net worth at the same time. When people just focus, my experience, when people just focus on paying down debt, it's such a negative experience often that they never get around to the part where they get to save and invest and they give up. Right. Let's talk about the live richly portion of

of this because certainly there are experiences that a person wants to have in their 20s and 30s, world travel, for example, that doesn't have an effect on your balance sheet, a positive effect on your balance sheet, but it is part of living a fulfilling, rich, meaningful life. How do you wisely decide how much money to allocate for that when you also are carrying student loans or trying to save up for a down payment? I think it's being super clear in what your values are, right? So part of the exercise Zoe goes through is actually learning how to write down what her values are. And once you're clear on your values, there are a lot of ways to reach your values don't involve a lot of money.

Right. So like in her case, part one of her values actually is adventure and travels the byproduct of that. Right. Like she wants to travel because it's going to give her adventure. But she starts to realize that there's a lot of ways for her to have adventure. One of the things she wants to do is she wants to take a photography. She's like, you know, you don't have to have a lot of money. take up photography, right? Like, there are so many things that people say to me that they want to do,

and I'm like, okay, well, that's awesome. I love the fact you want to go to Bora, Boa for a month. But before you go to Boa, bore for a month, what else could you do for a day where you'd feel like you're living rich and it wouldn't cost you a lot of money? Well, what do you mean? Where do you live? Oh, I live in, I live in Los Angeles. Oh, my God, Los Angeles has some of the most amazing trails ever. Like, there are hiking trails in the hills of Los Angeles all up and down the coast of California, all free. You could go out for a half a day and walk these trails and be in nature and feel healthier and get, in many cases, a spiritual boost from that experience that's above and beyond what would happen getting on a plan and going to Bora Bora. And so that's just like an example of a

conversation where you're like, huh, lots of people that don't think about it that way, right? Like, oh, I've got to go somewhere and do something big. That's not always a. the case. A lot of times it's baby steps, right? And even before, like, Zoe learns how to take, like, a sabbatical and take six weeks off in this book. And she learns how to convince her boss to let her do that. But, you know, sometimes it's not even six weeks, right? Like, sometimes it's two weeks. Sometimes it's a day, right? Like, some people, I'm like, you just need a day without your email. You need a day without your phone. You know, it's learning how to sometimes just unplug. So, I mean, there's just a lot of ways to live rich. And I think that the challenge that we have with the way everything's on social media today is that we've got, we've been, we're more exposed

to the, the bling, bling lifestyle than ever before, right? And it seems like everybody's rich. I mean, my nine-year-old yesterday was talking about Bugatti's, you know, these $1.5 million cars. And, and I'm like, my God, my nine-year-old knows about a $1.5 million car, because he's been watching this on YouTube. That's the weird world that we live in right now. A McLaren goes by, and he's like, oh, that's only $300,000. This is my nine-year-old. That's only $300,000. Yeah. Do you know how much money that is you don't need to ever need to have a $300,000 car? You know, living rich is about a feeling. One of my biggest dreams with this book is to inspire people to realize there are lots of ways to live rich without having a whole lot of money, and that you don't have to be rich to live

rich. On the same topic, let's talk about the radical sabbatical, because we've kind of alluded to that in your last answer. How do you, I know you've got your own radical sabbatical coming up in Florence, how do you plan a sabbatical and how do you keep it from devolving into just working from a less convenient setting? How do you take a true break when you have responsibilities? Well, we could do it into our podcast just on that. So this is my second sabbatical. I think the first thing is when you talk about sabbaticals, you know, explaining what a sabbatical is. It's the idea that you're going to take a break from work and do something different, which could be doing nothing. It could be like, I'm going to take art classes in Florence. I'm going to take cooking classes in Florence. I'm, I'm, so I'm leaving for Florence Italy on July 22nd. You know, I've been planning this out. Like when I even pitched the book, Blatea factor, the publisher, I said, we need to put the book out in May because I'm going to month of book in May, June, and July, and I'm going to move to Italy for a year. They were like, what? I'm like, yeah. Every publisher loves hearing that. But it's funny, right? Like, they also got excited about that. And I said, yeah, so that's the plan. So we can't

put the book out in fall. We need to put the book out in May. This is a graduation gift, because that's very much also what this book is perfect for graduation gifts for your high school kids and your college kids. And anybody who's graduating from school, like over the age of 15, this book is perfect for. But I think it's, first of all, it's deciding you want to break, right? And you have listeners all over the world. People who live abroad, the idea of taking three or four or five, six weeks off is nothing. Like the big joke you go to Italy and it's like, well, don't be in Florence in August because everybody leaves in Europe in the month of August, right? Like, things just shut down for six weeks because everybody in Europe takes a month off. They do. They take four or five, six weeks off. Restaurants close, stores close. And then people come back in September, right? In America, we never, the average American and you barely take five days a year off. So in America, we're just work obsessed. We think that work is living. In foreign countries, Italy is a great example of this. People work to live. They don't live to work. So what I see is that a lot of people are just exhausted. You can be an employee or a

freelance or have your own business, and it doesn't really matter. You can just, you can be on all the time. And so I just find that people need, people are tired right now, maybe more tired than they've ever been, they need a break. And when I took my first sabbatical in 2012, it was like a miracle. I was 46 feeling 50, thinking I was getting older, didn't know why I was tired all the time, I thought, this is just what happens. And then I took some time off, and within like 90 days, I felt like a brand new person. It was like, I remember saying to Ariana Huffington at the time, because she had been,

put a book out on rest and I said, you know, Ariana, taking off just six, seven weeks. I said, after six or seven weeks of not working, it wasn't like I recharged my battery. It was like I replaced my battery. I think that what a sabbatical does is it completely helps people recharge. And that's one of the reasons why more businesses now are starting to offer sabbaticals to employees or even forcing employees after a 10-year period of time to take a sabbatical, to literally be physically unplugged from the office for six weeks. So what Zoe learns about is a conscious way to plan sabbaticals in this book. And that completely changes her life.

And I think it's the kind of thing, too, where some people will read this and they'll be like, it's ridiculous. I could never do that. And they'll go through a list of reasons why it can't be possible, which she does, by the way, too, in the story. Then people like, well, maybe you could, but how would you do it, right? Then other people will read this and go, huh, that's amazing. I couldn't take a sabbatical this year or next year, but maybe three years from now I could.

three years from now, most anything's possible. Yep, you know what? This year you've got scheduled and next year you've got scheduled, but three years from now you have nothing in the calendar. There is nothing that you can't plan three years from now. If you told me you've got three years left to live, and I said you want to take six weeks off and go do something with your life, you'd be like, of course I do.

Well, guess what? What if you didn't, instead of, you don't know if you got three years left to live, what if you lived like you have three years left to live? What if you pretend like you've got 36 months left to live and what do you want to do that you haven't done yet? We need to live our life with more intention, more purpose, and we assume we're going to live. There's so much to talk about how long we're going to all live. We're going to live.

We're going to live to be 80 and 90 and 100. Well, you know what, I got news for you. Like the quality of life, I'm out all day long talking to retirees across the country. Quality of life goes down for most people significantly in their 70s. I just got back from our family reunion and everybody, my family in their 70s, really moving around slower now. My father is 79. His health has deteriorated massively in three years. my mom's like, yeah, I'm hopefully coming to Florence, but I doubt your dad is, right?

Like, this is what happens as you get older. And, you know, fortunately, my parents traveled a lot in their 50s and their 60s. But I just think you need to not assume you're going to live forever and you need to look at your life super intentionally. And that's what happens to Zoe. She learns how to live her life super intentionally. How do you balance that present with the future, though? I mean, many of the people who are listening to this podcast, people who self-select as

people who listen to personal finance podcasts are often pretty good at planning for the future, right? That's why they're listening to this in the first place. How do you balance the now with the future, especially when so much of the talk around money management revolves around delayed gratification? Financial planning, I tell people, it's not all about the day you're going to retire. It just isn't. And that's, you know, again, a less than a latte factor. It's not just about how much money can you have at the age of 60 or 65. For many people, there's a whole movement to retire early today, right? Like there's this whole fire movement. And I've renamed the fire movement instead of fire. I think it should be called fight, which is financial independence

transition early. So I love the fire movement because you've got millions of people that are consciously looking for a way to retire early so they can go live the life they want to live now and not wait until their 60s or 70s. But I don't actually think it's about retiring. I think it's about giving yourself the freedom to transition. So what I find is that most, a lot of people are listening to these kind of podcasts. There's something that they're doing in their life that they don't want to do anymore. For most people, a lot of people is their job. They've got a job that is not creative for them. They are not energized by what they're doing. And they're looking for a way out of the current situation. And that could be through investing. It could be through building a new business,

but they're looking for a way out of what they're currently doing. And I say to those people, good for you. The fact that your soul is stirring you to want to do something new, good for you. Now, the question is, how do you get there faster? Because if you hate what you're doing, then don't go do it for 20 more years. Come up with a financial plan that can get you free. It doesn't need to be free permanently. It can be free to transition. I was at Morgan Stanley as a financial advisor. I realized that my calling was not to be a financial advisor working with clients in one-on-one, my soul wanted to go out and teach millions of people to be smarter with money. And so, even though I had this great career making a ton of money, it wasn't what I wanted

to do with the rest of my life. So at 30, I was like, I don't want to do this for the rest of my life. I don't want to wait till I'm 50 to go write books and teach people. I might be too tired then. Turns out I'm not at 52, but I was like, I don't want to be, I don't want to wait till I'm 50 or 55 to do what I want to do with my life. I want to do it now, but I can't go do it right now, because I don't have the money or the financial freedom to go to it right now. So I worked on a freedom plan that was going to take three years. And I literally worked on what do I need to do to transition within 36 months out of Morgan Stanley so I can go spend my life or try to spend my life writing books and teaching more people about money?

Keywords try, right? Because you don't know if it's going to work. I didn't know it was going to work. I didn't know leaving Morgan Stanley would work out for me. I didn't know that moving to New York and knowing nobody and writing more books would actually work. everybody thought I was crazy. Your senior vice president of Morgan Stanley, you have,

your family has, my family had almost a billion dollars under management. And people are like, you're going to leave that? Like that, you have like the dream career. Only it wasn't the dream career

for me at the time because it wasn't who I wanted to grow into being. The key to so much of life where the happiness comes from is that you want your future to be bigger than your past. And often it's our past

that we have a defined us. And then we become trapped in our past. So I worked really hard for nine years at Morgan Stanley. I could have spent the next 25 years being at Morgan Stanley. It would have been a great successful career. But it wasn't what my soul wanted to do. Even now, I'm picking up again and moving to Florence Italy to go live a whole new lifestyle. And what I'm doing doesn't mean is right for everybody else. For some people, my sister has been at Morgan Stanley the entire time. I'm doing an event for our Morgan Stanley clients for the Bach Group next week. I'm flying to San Francisco and I'm doing a client appreciation event with my sister.

And she's been in the same office for the entire time since I left. It's been 18 years ago I left. And since then I've written 11 more books, those books have touched 7 million people. I've done thousands and thousands of media appearances. I've spoken in front of probably a million people through live events. That doesn't mean my life's better than her life. It's just different. I just took a totally different career track than she took.

She's happy with her career track. So it's not a judgment call. It's like you just need to know who you are. And if your soul's stirring you to do something more than what you're doing, you need to come up with a plan to help your soul get free. And insofar as coming up with that plan to help your soul get free, that's where the fire movement or the fight movement comes in. Totally.

The one thing, I mean, again, I know this is all kinds of critics of the fire movement. I love the fire movement. I think it's inspiring to see people looking at life differently. I just think that what's happening for some people, though, is they're obsessed with a number? And then the arguments, everybody debates, well, is that going to be enough money? You know, like I heard somebody come up as though. You're going to need $5 million to retire, which is ridiculous, by the way. You're not going to need $5 million to retire.

Everybody's different, right? Some people could blow through $5 million and some people could retire off a quarter of a million. You have an investment property that provides cash flow and you don't have high expenses. You don't need to work anymore. So I go back to it's not about retiring and not working. I actually don't know too many people who have gone through the fire movement and retired that are truly retired. Right. Like they're all doing something.

All my fire buddies have podcasts and YouTube channels and blogs and books and investments. Right. They're not not doing anything. They're not sitting on a beach reading a book drinking a pinacalada. they might have a picture of them doing that, but the realities are all doing other stuff. So, you know, I say I'm going to Florence and taking a sabbatical, but, you know, I'll write another book while I'm in Florence. I'll do other stuff while I'm in Florence. It's just, it's the new experience.

I go back to that idea of fight, which, you know, financial independence transition early. What do you want to transition to? You can transition at any age, by the way. You've got people listening right now that are in their 50s and their 60s. They're actually at the end of their career tale. maybe the corporation they're working for is giving them a retirement package. And they're going to take that package and retire in their 50s. But they're going to want to do other stuff.

I can't tell you how many of my clients would retire in their 50s and even their early 60s. And after a year or two, after they've traveled for a year, they get bored. And then they want to go back to work. And then they do go back to work part time. And more clients go back to work part time just for the fun of going back to work than didn't go back to work. But everybody's different. I will tell you that physically when you stop working, the change you see people go through in a year is remarkable. Like, the fastest way to look younger often is you just stop working for six months.

People will come into your office and I'd see people in like six months later they look five years younger and a year later they would look 10 years younger. And it's because they finally are getting sleep and they have less stress because we don't realize sometimes how much work is stressing us out until we're not working. We'll come back to this episode after this word from our sponsors. Are you tired of getting nickel and dined by your bank? Are you looking for a bank that's going to pay you a high interest rate on a checking account while also not clobbering you with fees? Check out Radius Bank. They offer an account that's called Radius Hybrid Checking, which is a free high-interest checking account.

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That's freshbooks.com slash paula. Freshbooks.com slash paula. Do you see the opposite happen? Do you see people start to age more rapidly if they leave their job but don't replace it with something meaningful? The answer is yes. I can tell you there's two types of retirees. There are those that are focused on who they used to be.

The entire conversation ends up being about who they used. used to be what they used to do and about their past. And what happens for a lot of those people is they become depressed. You can only talk about your past for so long, right? And so when I look at our clients who are retired who are happy, there's all kinds of stuff that they're excited to be doing. There's all kinds of stuff that are looking forward to doing. Their future is bigger than their past. I'm going to go around the country and do this tour for all of our clients. And, you know, and most of our clients are in their 60s and their 70s and some are in their 80s. But whenever I I say like at any age, you've got to make your future bigger than your past.

You can tell which ones feel like that's them because they lean forward. They nudge each other. One of the beauties of being, if you are able to retire in a nice age, is that if you can retire in your late 50s, early 60s, which is really in many ways early retirement, you have a lot of things going for you. First of all, you're healthy. So your health and your 60s is significantly better than your health in your 70s.

And it's also, by the way, better in your 50s than it is in your 60s. It just is. you have time. Time affluence is a huge thing. That's one of the biggest reasons that people are so happy between the ages 16, 75. They have their health, then they have time to do what they want to do. You also still have your friends with you. Your friends are still alive. And then you have family and you have grandchildren who want to spend time with you. And so all those things make for a very rich retirement in your 60s. And then often in your 70s, people start to get sick and people die. And so, you know, I I'm really focused, like, it's not in this book, but I teach a whole concept called return on retirement, which is ROR versus R-O-I. Because the financial service industry is always talking about return on investing. You know, you need this rate of return, and this is how much rate you can spend. And I look at our clients and I say, the whole thing's about getting the greatest return on retirement, you can.

And the most important thing is that you need to know that there's really three stages of retirement. There's the first stage, which I call the go-go years, it's the stage that you're the most active you can do the most is usually between 16 and 75. There's the second stage, which is called the slower go years. You're not going to travel as much. It's like my father now, 79. He's not traveling. My mom went on a safari with me last summer, but my dad didn't go because he doesn't

have the health. And then the third leg is, you know, 85 on up. And that's the often who won't go years because someone doesn't have the health to go do anything. Like, it's just, it's a significantly different quality of life between the age of 85 and 100. And I think, again, I go back to the fact, like, you've got to fully utilize your life. I was just a mastermind in Puerto Rico with a bunch of influencers that are super successful

and all household names. And, you know, most of them were in their 40s. And I'm in my early 50s. And I said, but to everybody in the room here, I'm like, these next 10 years are actually the healthiest of your life. Same thing with anybody who's listening. Like, the next 10 years are the healthiest of your life. What are you going to go do with them?

And that really woke some people up. Like the next 10 years are the healthiest of your life. What are you going to go do with them? If you only had three years left to live, what do you want to get done that you haven't gotten done? What do you want to personally do that you haven't personally done? Because we can spend so much time on how to grow our businesses, but like, what about your life? What do you want to do to grow your life? And so I'm going to focusing on this whole leverage concept because I want people to think about ways to grow their life.

It's not just about growing your money. The next 10 years are the healthiest of your life. How does the three-stage retirement model apply in a situation in which a person retires at the age of 40? Is it still three stages with the first stage extended out? Or would there be additional stages in that context? I think the first stage is extended out. But what I would tell you is you're 40 and you quote-unquote retire. You have so much energy in your 40s.

that it's very, very rare, almost unheard of for someone to retire on their 40s and truly not go back and do something else. It just is because, first of all, whatever drove somebody to be financially free by 40, that person is a driven person. Right. So if they had an exit from a business, they sold their business, that person within a year or two is going to have other ideas, have other investment opportunities, and more than likely almost always go do something new. if the person just was a phenomenal saver and they saved to get to the point where they've got a certain dollar amounts put aside and now they're 40 and now they're not going to work what happens in the real world is that if you start to live off your assets

and you spend 20 years accumulating when you start to live off your assets your assets stop growing typically or they don't grow fast and so often people who've been obsessed with accumulation find it very difficult to actually watch their assets to decumulate. So they go back to work because they don't like that. They've kept score on the value of their life by their net worth. And all of a sudden, their net worth is going down. And like, okay, I can do this a little bit longer, but then I want to fill my bucket back up.

I'm not saying this is right. This is just reality. The other type of person who retires at 40, you know, these are rare examples, but they inherit money or they win something. those are typically the ones that maybe don't go back to work. But if you just do nothing in your 40s and your 50s, typically you don't just do nothing. You do something else and it's usually not good for you.

Right. No, truly, like, that's what happens. You do something else that's not good for you. You start drinking too much. You have an affair. You blow up your marriage. You take up gamble. I mean, I've seen people do this where everything went right for them.

They did everything right, and they get in it. They just, but you get bored. First of all your friends are working. So it's a weird thing to be the only one not working for an extended period of time. But there's just great beauty and joy in taking a short period of time off and then going and doing something different. And that's, I think, what most people end up doing when they're quote unquote done in their 40s. They're not done. They're going through a transition to the next thing.

And I don't think people talk about that enough yet. I think you'll start to see the fire movement evolve and more of that conversation because it's already happening. I meet people who've retired in the fire movement and now they're going back and they're like, I'm not really retired. I'm going to go do this. I'm going to go do that. But it's kind of cool to have the option. I think what we all want, maybe not everyone, but most people want optionality.

Right? Like the whole idea of like, I want to be able to do what I want to do when I want to do it. I don't want to have to go to work for a guy I don't like to do things I don't want to do. I don't want to work for a company that I don't believe in. I always say nobody woke up. Nobody was born and said, you know what I hope? I hope someday I'll grow up and have a job I hate to work for a boss I don't respect. Right?

Nobody says that. And yet when you look at like Intuit did a study the other day and came out and said that 24 million people who have jobs right now would like to quit their job in the next year. But that only 10% of those people will, which by the way, is still a lot of people. And that, you know, the number one reason is money. And so I think everybody wants that freedom to be able to walk away. from something that they don't want to do to be able to go figure out what is they do want to do or actually go do what they want to do. And that's a big thing. Like, I'm going to go do a class with Create a Live here next week in Seattle. And, you know, a lot of people who go to Create a Live

are people who have jobs, but they want to go focus full-time on their freelance life. They want to go focus on starting their own business. And they want to transition from being employed to being free. And so we've got a class we're doing called The Latte Factor, How to Retire Early, the Latte Factor, masterclass. And depending on when people listen to this, they'll be able to go find that class on our website. Our website's the lattefactor.com or Davidbock.com. But I'm going to go teach an all-day class there live, at Create Live, going kind of through the step-by-step process to fight financial independence transition early so that you've got those options. At what point is a person financially secure enough that they can transition to a lower-paying

job or turn down the offer of a higher paying job. Sometimes it's hard not to look at all of the compounding interest charts and say, hey, if I just, even though I don't like this, if I just stick with it for just one more year, we call it just one more year syndrome, look at what effect that would have for me 20 years down the road. So again, I guess this kind of echoes back the conversation about present versus future. How secure do you need to be before you can start making those job-related decisions, the transitions. You know, I hate to say it's personal, but it's personal. Everybody's different.

I promised that the number that I felt that I needed at the age of 27 to be free was different than what somebody else who's 27 things. So it's just, it's really personal. Like, it's amazing when you do, I used to have a radio show. And one of the questions I asked on a radio show is how much money would change your life. And I had a reporter with me, actually, from the New York Times. It was funny because they wrote a feature story on this. years ago. And I say, what do you think the number is going to be? And like, everyone's like,

probably a million dollars, right? And I go, it's going to be so much lower than that. And by the end of the show, it was like, the number was like 10,000. And often it's less than that. The truth is when you talk to most Americans, it's often even less than $10,000. And that's because six out of 10 Americans don't have $1,000 in savings right now. So, you know, a lot of people, if they had six months of expenses set aside, they would quit their job. Some, people would leave their marriage if they had six months of expenses aside. Like, people stay in abusive marriages because they don't have any money to live for a week. So it literally goes back to you. What do you feel like you need? And if someone says to me, God, you know, well, I need X,

right? Well, then what's the fastest way for you to get X? It's always going to be cut your expenses, number one, because that's the fastest thing you can control. I can catch your expenses now. right now I can go through your expenses. I can go through all your credit card statements, see what you're paying for monthly, and I can get rid of anything that's not life essential. Do you need Netflix to live? No, you don't.

You know, like you can literally go through the list, and everybody's got two or three or not everybody, but lots of people have $100, $200, $300 of these things. You can go, well, boom, that's gone. All right, now we just found you $3,600 for the year. Average person's car payment is $533 now a month. I've got people go, I have, you know, I can't give up my car.

Really? There are buses. There are car pulls. You don't need two cars that you and your wife could share a car. Like, there are things that you can do quickly to cut your expenses. If it's important enough to you, then the second thing is, once you've done that, then the next thing is can you grow your income? And people will, I have a job.

I can't get a raise. Where I work, I can't get a raise. Okay, well, then what else can you do to grow your income? Again, I've done these real life makeovers for things like the Oprah show, right? Like, where you, someone says, well, I can't go get a job. a pay raise because I'm a teacher. Okay, well, what else could you do? And then we come up with the list of things they could do to make extra money. I was with somebody there a day who's a rabbi. And he wanted to make extra money. And the next thing you know he's doing is he's doing

weddings and funerals outside of his temple. And he's making $50,000 a year now doing weddings and funerals. And he's like, I'm going to do 28 of them this year. And so, like, that's his sidekick. And by the way, that's the money that he, uses to take care of a duplex property that he bought, which is creating rental income, and he's paying down the debt. And that's his freedom vehicle. So he went and got a side gig that he works on nights and weekends that brings in some extra money, that he takes that money and uses it to buy an asset, and that asset's going to provide an income stream that ultimately is going to be his freedom vehicle. That's a great story because it shows how, even if a person believes

that they cannot save based on what they earn in their day job, they can still get a side gig, they can still earn some extra money. And because they don't need it, because they've already been living without it, all of that can get invested. That's exactly right. And by the way, for that person specifically, that was a complete conscious lifestyle plan. And that person could have done the opposite with that money, right? They could have gone and made the extra money and bought themselves a new truck. Or, come up with a million other ways that could waste the money. He didn't do that. He's using the money to get himself an investment that's going to ultimately help the family be financially free.

One of the lessons that Zoe learns is that there's a game being played when it comes to money and that there's two primary ways that you build wealth in America, real estate and stocks. And that the reason to rich get richer is they own those two assets. And that there's an escalator to building wealth. And the escalator that you have to be on is you have to own real estate. and you have to own stocks. And if you don't, you get left behind. And so through the mentors that she meets in this little book in 90 minutes that you'll meet, she learns how to get into the game of building real wealth and financial freedom.

Those lessons are what give her then this space to realize what else she can do with her life to live rich. And that she starts to feel rich before she's even financially wealthy because she starts to see a better way of life. We'll come back to this episode in just a minute, but first. So one super healthy habit that you can develop is really good dental hygiene. That's one of those topics that's critical to our lives, and yet people don't really talk about it very often. So let's talk about it because there are a lot of people who are not brushing their teeth correctly. They're not brushing their teeth long enough. They're not switching sides in the way that they should be.

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And so the thing I like about them is that they're effective, they inspire a better clean. That's why I love quip and why over one million happy healthy mouths do too. Quip starts at just $25, and if you go to get quip.com slash Paula right now, you can get your first refill. pack for free. That's your first refill pack free at g-et-k-u-u-i-p-com slash Paula, P-A-U-L-A. We've all read some surprising online reviews, right? Whether you're trying to get a sweet deal on something that you've been saving for or trying to find the best happy hour in town, it's generally a good idea to read the reviews first. So why should finding the right software for your business be any different? Read thousands of real software reviews and

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email management software. I wanted to check to see if the email management distribution program that I'm using for my business is a good one, or if I should switch. So I went on Kaptara and I looked at the reviews of them and of some of their competitors. It gave me more information. It helped me choose between my options and ultimately reassured me that I'm in the right one for me. So check them out. It's a free online resource. Visit Kaptara.com slash Paula for free today to find the tools to make an informed software decision for your business. Captera.com slash Paula. Captera, that's C-A-T-E-R-R-A dot com slash Paula.

Captera. Software selection, simplified. One of your messages, particularly with the latte factor and with using lattes as a metaphor for unconscious spending, spending on things that are not high priorities, A big part of your message has been by making these small cuts from our budget, we can free up money to invest. How do you know, certainly most people can pick the low-hanging fruit, how do you know when you've 80-20 to that vehicle and it's time to refocus on earning versus it's the spend less versus earn more? How do you know where your energy should go? Well, I think that they both matter.

I think the fastest thing to do is cut out the stupid ways you spend money that you don't need to be spending, right? Like, we actually got a domain that says don't buy stupid shi-stupid.com. Go to don't buy stupid shi-stupid.com and check it out. You know, we just all do these things. I went skiing with my son because, again, I'm trying to teach lessons to my kids, right? So I gave my son money to go buy lunch. And I was on a call and I came back. We both went and got lunch at the ski resort.

And he comes back with bottled water. And I go, I gave you $20 and you just spent $1,000. four bucks on bottle water. And I had in front of me a cup that I got the same exact restaurant and filled up for free with water because I always go, do you guys have free water? And they, yeah, they hand you a cup and you go fill it up with water. Now, I have a lot of money, Paula. I don't need to drink free water. I just refuse to spend $4 on a bottle water if I don't have to, right? And I'm teaching him a lesson. So I took a picture of it and I put it online. He's like, Dad, you're not going to put the picture. I'm like, yes, I am. I said I'm teaching my son a lesson here.

And you can see my Coca-Cola cup that they gave me at Alto with my free water. And then you can see his bottle of water. And my kids now, you know, I've drilled this into them. They've learned, right? We were at Disneyland yesterday, and I got us free water instead of spending $16 on water. Now, I can buy all the bottle water I want. It's the point of it, though. And it's teaching these children. Like, no, you know, a dollar a penny earned. Is it a penny? saved. Yes, it actually is. So I think the thing is the reason the latte factor has become so popular and so ubiquitous and it's been taught all over the world and everybody relates to it is we all have something. Could be coffee, could be ballwater, could be cigarettes, could be all these different subscription fees you've got. We're wasting money on stuff. And what's happening is we're not realizing that we're actually trading our life for those things. You went to work,

you worked all day long, you didn't keep any money, you didn't pay yourself first. You traded your day for stuff. And if you had some of the stuff, like less stuff, you'd have more money. So start there. I made, I did a video there to me making coffee at home. Watch this. Everybody, I was like, Mr. Rogers. Here I am making coffee and I put it in a little to go cup, which costs 10 cents. And then my coffee probably costs another 10 cents. I'm like, so I just call it at least 50. And I literally was taking it to the airport. I'm like, so instead of getting a line at Starbucks at the airport and spending $5 on coffee, I made my coffee at home for less than 50 cents. Yes, it does matter. With that being said, all those things are a great place to start because you can actually

do it. You can do it tomorrow. But then you have to take the money and save and invest it. So then you've got to go open up an account like at Acorns and have money automatically being saved or you need to be signed up for your 401k plan and be saving money automatically. Then you need to work on growing your income. But if you constantly believe you've got to grow your income before you're going to deal with the way you spend money, my experience from working with people for so long is if you believe you have to make more money to start saving investing, you will never save an invest, which is why I get people to focus first on where are you spending it. Then we'll go focus on growing your income. All right. We are coming to the end of our time. If you don't mind, can I ask you one final

question before we... Yeah. All right. My final question to you, in this book, the latte factor, Zoe has a conversation with her mother that is based on a conversation that you had with your grandmother. Can you tell us about that conversation? Yeah, totally. Well, Paul, you actually read the whole book. I did. That means you got to the end. That means you got to the Q&A. Well, so wait, what did you think of the book? You asked me a question. I've been going for an hour. What did you think of the book? You read financial books all the time. What did you think? I loved it. So I did not know what to expect as I was going into it. And to be honest, when I heard that the name was the latte factor, I was like, how has he figured out a way to keep talking about lattes? I had no idea that

this was going to be a narrative story, like narrative fiction. And I don't think that there's enough of that in the world of financial books. Even when I read the first chapter and we open with Zoe getting off the train and the Oculus and going to Freedom Tower, I think that that was just an introduction that was then going to lead into your standard personal finance book. And so as it kept going and as I found out that this entire book is a story, I love that because I strongly think that we need more of those in the world of personal finance books. There are very few. I mean, there's the richest man in Babylon. And that's the only one I can name, to be honest. Isn't that amazing? It's the only, because you know what, it's true. There's the

richest man in Babylon. And I would also say that there was a long time ago book called The Wealthy Barber. Oh, that's right. The Wealthy Barber by Dave Chilton. But even that book's a little bit more prescriptive, right? Right. But both those books, by the way, phenomenal books that impacted millions of people. And most people have not even heard those books. Exactly. Laura Vandercam just came out with a book that's also fiction. You know, it's fiction that tells a story. And I just thought, wow, why don't we have that? And she writes about time management, not money management. But these are concepts that can be told so well through story, and almost nobody is doing it.

Well, thank you. So I'm really glad you liked it. I will tell you that, so we've got about 2,000 people who have had a chance to get the book in advance. We have an insider group at our website. Depending on when you air this, if you go to the latte factor.com, we have an insider team, and there's 1450 people who got preview copies of the book, and they've been reading it and reviewing it. And I've had more excitement from readers of this book than any book I've ever put out so far. And I think it's for all these reasons, right?

Like it's a story. You can read it in 90 minutes. It totally impacts you. I just had one of our writers for an interview, do a Q&A with me and then turn it into an article that's going to be running on Wisebred. He said to me, oh, my God, I read the book. I did your interview. And he's like, I finally now, now, because of that, I'm signing up for my 401 gay plan. that's it.

If I can get people to read a book and just make one decision like this, that's going to change his entire life because he's a young kid. So what you asked me about was a story about my grandmother, and that's really the central theme of this book. The end of the book, there's a Q&A with me. And I don't want to give away Zoe's grandmother's story, but there's always mother's story. But the story of my grandmother, Rose Bach,

is my grandmother was the one who taught me about money. She was my first money mentor. And she became a self-made, millionaires starting with nothing at the age of 30. She started investing. She taught me how to buy my first stock at the age of seven in McDonald's. And so she was my first money mentor. She's why I wrote my first book, Smart Women Finish Rich. I wanted to teach more women how to do what my grandmother had done. And at 86, my grandmother, unfortunately, my grandmother, I was working on finishing smart women finish rich and my grandmother had a stroke. And we moved my grandmother into a

nursing care facility. She knew I was finishing this book. And I asked her to any last lessons for me to put in this book? And she said, no, I've really taught you everything you need to know. And I asked her if she had any regrets in life. And then she proceeded to tell me what those regrets were. And she went through her life and she went back to all the way of being a teenager. And she shared with me her five biggest regrets. And in those regrets, she said, David, it's not about what my personal regrets are. She's about why I have those regrets. And she basically said to me, I'm dying. I'm never going to get out of this bed. And I'm like, I was so naive. I'm like, you're going to be fine. You're totally going to get better. You're going to be out of this nursing care for the only amount of weeks. And she's like, no, I'm not. And she said, you need to listen to me. She's like, my regrets are this. She said, those five examples I gave you, I came to a fork in the road. And then every time I came to that fork in the road, there were two ways I could have gone. One way, there was more risk. But that's where my dreams were. That's where I really wanted to go with my life. And she said, the other road was the safe route. And she said, at every time of those regrets,

I look back and I didn't take the risk. I took the safe road. And she said, and now I'm lying here at 86 and I'm never going to know what could have happened. And that's why I have those regrets. And so she said to me, you're young. You're in your 20s. She's like, I don't want you to have these regrets.

I don't want you to look back on your life and be 86 someday and go, what could have been? You need to know that when you come to these forks in the road, there's going to be this little boy inside of you that wants to go take the risk. And, you know, if it's not life-threatening, and go take the risk. Like, you know, don't listen to your big boy who's telling you not to do it.

I drove away from her nursing care facility and I went back to my office, which was like a mile down the street, and I broke down crying in the garage. And that was because I knew what I wanted to do was go spend my life teaching people how to be smarter with money and write these books and do all these things. And I was at Morgan Stanley. And I basically looked in the rear of your mirror and told myself, you know what, three years from now, I'm not going to be doing this anymore. Three years from now, I'm going to be one way or another.

I'm going to figure out how to go live my, go for my dreams, and not have any regrets. And it took four years. And four years later, I left Morgan Stanley, and I moved in New York. And the next thing I did is I wrote The Automatic Millionaire, and that became the biggest book to this day I've ever written. And I continue to push to go for my dreams. And I think that, you know, the part about that story is what I hope it will make people think about their own lives and take risk in their own life. And my son, when he finished the book, after he talked about his IRA account, I asked him, what was the biggest takeaway you got from the book?

And he said the story about your grandmother and the need to take risk. And he looked at me and he said, you know, if I hadn't decided to go with you to Florence, because we gave him a choice because he's going to be a sophomore. Even though we designed this trip because we wanted to take him his sophomore year, we gave him a choice. He was given a choice, do you want to go to live in Florence in Italy for a year and travel all over? and you'll go to a new school and you'll learn Italian, you get to decide.

And he chose to go. And which is a huge credit to him at the age of 15. It's always easy at 15 to say, oh, I like where I am. I've got all these friends that I don't want to leave. And he said, you know, Dad, if I hadn't decided to go with you to Florence Italy, that would have been my first biggest regret in life.

I would have looked back on that the rest of my life and wondered what would have happened if I had gone. And I got, I just, it gives me chills. telling you that story because I thought to myself, everything I could want as a father, he's already got like two of the biggest lessons I want. The fact that he could have read this book in less than two hours and he's got that lesson now in life, that's the ultimate gift, right? And if I can go put this in more people's hands and give them that gift, then all this work will have been worth it. This is my last financial book. And I would not be doing my life's work

if I didn't get this message out. And so I have spent, again, like three years of my life on this and you know you were one of a many many podcast and media interviews that we'll do and I look at every single one of these is like I've only got one chance to do this right like I treat every one of them like this is this could be the last one I ever do I wanted to really matter so I hope for someone who listened to this they felt like they got a good use of their an hour of their life and then I inspired you to go do something with your life that maybe you're not doing yet or if you are doing it that you realize you're on the right track wow what a powerful story Thank you. This is your last financial book. What are you going to do after this?

Well, in Florence, I think I'm going to write a memoir on a radical sabbatical. I'm going to write right now my tenet of title is the Radical Sabatical, A Year by the Pontavecchio. And I'm going to write my version of I pray love while I'm in Florence. And then, you know, and then I don't know. I don't know. This is just one of the things I do. I'm also the co-founder of a financial service company, which is one of the fastest growing RIAs in America. I think when I was talking about it at Fincom, but that company today, A, wealth management, we are almost up to $7 billion in our management, and we have over 500 financial advisors now across the country. So that's another thing I do. But I'm going to write things that aren't this book for me, even though we, like you said, oh my God, it's the latte factor and it's about the coffee. It's not. It's about really the bigger issues of life. And so I think the next things, if I keep writing, I'll write about, it's all about living rich. How to go, how to, and that's why like writing, you know, even the idea that I would write a book about. taking the sabbatical. I want to inspire more people to go live their richest life now.

And I think 13 books on personal finances is enough at that point. I hope this is going to be the one. You know, you always, people go, which book did you like the most? And every time you put a book out, it's like, it's like a child and you think, well, this is the one. This is the child, right? Like, so I hope that this is the child that will go out and touch more people than anybody I've touched so far, because I think, God willing, this will be a book that people read. it touches them, they'll go give it to their friends. And I think parables, the reason people don't do parables is that they really normally don't look. So the publishers don't want to buy them.

And they're very hard books to promote. And yet when they work, they work big. I was just talking about you take my favorite books like The Alchemist and Who Move My Cheese? And those two books combined have sold over 100 million copies. So when they work, they work big. And my dream for the Latte Factor is that this is a little book that goes big, that really, not big because I'm obsessed with how many copies it sells. I'm just obsessed with how many people's lives it can touch.

The Alchemist also changed my life. I read it right after I quit my 9 to 5 job. And it was the most influential book that I read that year. And what's interesting too, I think that's what's cool to like the Alchemist example like that you read that time. sometimes with storybooks, like a parable, like The Alchemist, because I've re-read that book multiple times. You can go back and reread a parable and it will touch you differently five, ten years later. If you read The Alchemist today, it would touch you differently than it touched you back then.

And I think that that will be true for people even like with the Lattee factor. Like I think it could be the kind of book that people will read now and then they'll come back to it 10 years from now. And they'll be at a totally different point in their life and it'll touch them in a different way. A lot of my books have been evergreen books. Like, it's crazy, but the automatic millionaire was on three number one bestseller list on Amazon last week. And that book is 14 years old. So by putting out these timeless messages, they've stood the test of time, which is a big part. I think also that's been powerful.

Absolutely. Yeah. Well, Paul, I really enjoyed this time. I salute you in all your success. I know you've had over 6 million people download your podcast. So I'm very excited for all the good work that you're doing. And again, thank you for having me on. David, thank you so much for spending this time with us.

What are some of the key takeaways that we got from today's interview? Here are five. Key takeaway number one. Start building your assets immediately, even if you have debt. As David points out, if you wait to be finished paying off your debt before you begin building assets, you might not begin building assets until, you might not begin building assets until pretty late in the game. So continue building assets always,

even while you're also paying down student loans, car loans, your mortgage, and other debt. You don't want to wait to pay off your debt to start saving. That's the biggest thing we see people doing where, like, well, I've got student loans, I'm going to pay my student loans off first and then start paying myself first. And what I tell young people especially is like, if you do that, you'll wait until you're 40 to even start saving.

You'll be so far behind. If someone says, I know you got into the game of buying real estate and that you prioritize that, right? And that's what helped you become free financially. I'm a huge proponent of buying real estate. So someone says to me, well, you know, I'd rather save money to buy real estate. Well, great. Then saving money automatically to buy real estate, that's a pay yourself first account. I still would like to see you use an IRA account.

But my whole thing is I want you to build assets because it's assets that provide income. And assets that provide income, provide freedom. Now, to be clear, credit card debt is an emergency, particularly high interest credit card debt. Anything in the double digits, it's an emergency, your hair's on fire, pay it off. But make sure that you're getting your full 401K employer match. Because if you don't, then you're foregoing an employer match. You're foregoing compensation that is rightfully yours. And in addition to that, create a tiny emergency.

emergency fund, even if it's just $1,000 or even if it's just one month's rent, create that small emergency fund. And the reason that you do these things is because it creates strong habits. And that's the point that David makes when it comes to investing. Even while you are paying off your debt, get in the habit of investing because that habit is sticky. So get in the habit of building assets. That's key takeaway number one.

Key takeaway number two. Rich is a feeling, not a number. And in that regard, being quote-unquote rich or wealthy is exactly the same as how I define financial independence. I define FI as a feeling and not a number. You know, living rich is about a feeling. One of my biggest dreams with this book is to inspire people to realize there are lots of ways to live rich without having a whole lot of money. And that you don't have to be rich to live rich. You don't have to be a bigillionaire in order to have a rich life.

and whether or not you are rich has less to do with some digits on a screen and more to do with how you feel about your finances. Are you better than solvent? Are you stable? Do you feel abundant? Do you have the confidence to know that you can handle most major financial issues, barring any major Black Swan events, that you can handle most things that come your way? If you feel that financial confidence, guess what? Congratulations. You might be. Be rich. So that's the second key takeaway. Rich is a feeling, not a number. Key takeaway number three, sabbaticals and mini retirements are critical. They're a critical aspect of the work, rest, work, rest, interval training of life. So what I see is that a lot of people are just exhausted. You can be an employee

or a freelance or have your own business, and it doesn't really matter. You can just, you can be on all the time. And so I just find that people need, people are tired right now, maybe more tired than they've ever been. They need a break. And when I took my first sabbatical in 2012, it was like a miracle. I was 46 feeling 50, thinking I was getting older, didn't know why I was tired all the time. I thought, this is just what happens. And then I took some time off. And within like 90 days, I felt like a brand new person. It was like, I remember saying to R. Anna Huffington at the time, because she'd put a book out on rest. And I said, you know, Ariana, taking off just six, seven weeks,

I said after six or seven weeks of not working, it wasn't like I recharged my battery. It was like I replaced my battery. As David mentioned, he is going to be taking a radical sabbatical. He's going to Italy for a year. And during that time, he'll explore new things. He'll write another book. He'll spend a bunch of quality time with his son.

So these sabbaticals, these mini retirements, are important. They're not a mere afterthought. They are as important to a long-term work life as rest is when you're exercising. In fact, I've actually been thinking, and I would like to get your feedback about this. So I've been thinking about taking a September sabbatical. I've been thinking about taking the month of September to focus on travel and exercise, basically take the month of September off. And so I actually would like to know what you think,

because what that would look like for this podcast would be that during the month of September, we could in the month of September air rewind episodes, which means I'd re-release some of my favorites. Like, for example, my two-part interview with Andrew Hallam, that was one of my favorites, and that was so early in the game that a lot of people haven't heard it. That's something I would love to re-release in September. We could rebroadcast interviews that other podcasters have done with me. That's another option. So there are a lot of different options, but I've really been thinking, you know, we've talked to a former podcast guest, Bob Loddick, about the sabbatical that he took.

And now we've got David Bach talking about sabbaticals as well. And I'm really wondering, since we talk about sabbatical so much, if I should take a one month September sabbatical. So let me know what you think about that idea. I'd like your feedback on it. I'd like to float this by you. Head to Instagram and leave a comment. Let me know. I'm on Instagram at Paula Pant, P-A-U-L-A, P-A-N-T.

Anyway, the key takeaway is sabbaticals matter. Speaking of which, how can a person plan a sabbatical? Well, David recommends, and this is key takeaway number four, David recommends planning something, if you have a big, hairy, audacious call, schedule it in three years or less, because you can, no matter how busy you are, no matter how packed or full your schedule is,

you can plan just about anything for three years from now. Three years from now, almost anything's possible. Yep, you know what, this year you've got scheduled, then next year you've got scheduled, but three years from now you have nothing in the calendar. There is nothing that you can't plan three years from now. So if you yourself are thinking about taking your own radical sabbatical, sure, maybe you may or may not be able to do it this year or next year,

but in three years, I bet you could. You might be able to. So think about that, get the wheels turning a little bit, See what you can do. So that's the fourth key takeaway. And finally, key takeaway number five, fire, or as David calls it, fight, is not about retiring into nothingness. It's not about a withdrawal. It's about a transition into something more epic, more adventurous, more loving, more meaningful.

And fire is not a fleeting whim. Fire is a calling that stirs your soul. It's an inner voice that says, you know what, the status quo of my life does not quite feel right, and I have the power to do something about it. That is the essence of fire. For many people, there's a whole movement to retire early today, right? Like there's this whole fire movement. And I've renamed the fire movement instead of fire, I think it should be called Fight, which is financial independence transition early. So I love the fire movement because you've got millions of people that are consciously looking for a way to retire.

So they can go live the life they want to live now and not wait until their 60s or 70s. I don't actually think it's about retiring. I think it's about giving yourself the freedom to transition. So what I find is that a lot of people are listening to these kind of podcasts. There's something that they're doing in their life that they don't want to do anymore. For most people, a lot of people is their job. They've got a job that is not creative for them. They are not energized by what they're doing. And they're looking for a way out of the current situation. That could be through investing. It could be through investing. It could be building a new business, but they're looking for a way out of what they're currently doing. And I say to those people, good for you. The fact that your soul is stirring you to want to do something new, good for you. As David reminds us, for most people, the next 10 years are the healthiest years of your life. What will you do with them? One thing to keep in mind is not to get too caught up in the money. The fire movement attracts a lot.

lot of people who love numbers, as do I, myself being one of them. And we can often get so caught up in the numbers, the 4% withdrawal rate versus the 3.5% withdrawal rate, which one is better? You know, we can get so caught up in that, because it's fun, that we lose sight of the bigger picture. The one thing, I mean, again, I know this is all kinds of critics of the fire movement. I love the fire movement. I think it's inspiring to see people looking at life differently. I just think that what's happening for some people, though, is they're obsessed with a number. And then the arguments, everybody debates, well, is that going to be enough money? You know, like, heard somebody come up as though. You're going to need $5 million to retire, which is ridiculous, by the way. You're not

going to need $5 million to retire. Everybody's different, right? Some people could blow through $5 million and some people could retire off a quarter of a million. You have an investment property that provides cash flow and you don't have high expenses. You don't need to work anymore. So I go back to it's not about retiring and not working. The ultimate purpose of all of this is that we want to be happy, right? Like, that's why we're doing this. We're doing it because we want to have a better life. And happiness doesn't come from luxury items or fancy cars or fancy dinners.

The thing is, there's a distinction between pleasure and true happiness. Fancy five-star dinners create pleasure. A life well-lived creates happiness. The key to so much of life where the happiness comes from is that you want your future to be bigger than your past. Those are five key takeaways that we got from this conversation with David Bach. If you enjoyed today's episode, please do three things. Number one, subscribe to the Afford Anything podcast in whatever app you're using to listen to podcasts, whether it's Apple Podcasts or Spotify or Pandora or YouTube.

hit the subscribe button or the follow button so that you don't miss any of our upcoming episodes. While you're there, please leave us a review. These reviews are incredibly helpful in allowing us to bring amazing talent, insightful guests onto this show. And thank you in advance for doing that. Finally, and most importantly,

please share today's episode with a friend or a family member that is the single most important thing that you can do to help support this show because, and not just this show, but to help spread this message, what we're talking about here, this is important stuff. This is stuff that changes people's lives. And if you can share this with just one person who might open their first 401k account or start an IRA or begin saving for a rental property or pay off their credit card debt, think of the impact that that's going to have in their life. So please share today's episode with a friend or a family member. And thank you again in advance. My name is Paula Pant. This is the Afford-A- Anything podcast. You can follow me on Instagram at Paula P-A-U-L-A-P-A-P-A-N-T. Thank you again for tuning in, and I'll catch you next week.