Afford Anything - What I Love About the FIRE Movement - with Clark Howard

Episode Date: October 29, 2018

#158: Clark Howard loves the FIRE movement. That's because he's one of us. Clark began investing in real estate at age 22, started a travel agency at age 25, and retired at age 31. He sold his travel agency, moved to the beach and relaxed for four years; then he started a second career as the host of The Clark Howard Show, a popular radio show that's syndicated nationwide. Today, he's a personal finance celebrity. His website receives more than 50 million views per year. He has more than 1.1 million followers on Facebook. Clark is a consumer advocate and personal finance voice who walks the talk. He doesn't accept sponsorships that conflict with his values. He loves frugality and efficiency. Last week, he was traveling in New York on a company expense account, yet he still rode the subway, because he didn't like the idea of wasting money on a taxi ... *even if it wasn't his own money.* He's a philanthropist who leads with a service-first framework. During Hurricane Katrina, he volunteered with a team that handled medical evacuations. After September 11th, he joined the Georgia State Defense Force, which is an unpaid, unarmed volunteer component of the state Department of Defense. He sponsored the construction of 74 houses through Habitat for Humanity. He's provided toys for more than 150,000 foster children at Christmas. He's a multimillionaire and he flies in coach. When the now-infamous Suze Orman episode came out, Clark immediately issued a response on his own syndicated radio show. He came out in strong support of the FIRE movement. He said that he couldn't imagine how anyone could criticize the notion of saving half of your income. When I heard his remarks, I invited him on this show to elaborate. What does he think about the FIRE movement? Why does he like it? How would he respond to the objections? For more information, visit the show notes at http://affordanything.com/episode158 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, your focus, your energy, your attention. It applies to anything in your life that's a scarce or limited resource. Any resource that you need to manage. How do you manage it well? That is quite literally the million-dollar question. And that's what this podcast is here to explore.

My name is Paula Pant. I'm the host of the Afford- Anything podcast and the founder of Afford-anthing.com. Today, Clark Howard joins us to talk about why he loves the Financial Independence Retire Early Movement, the Fire Movement. Clark Howard is also one of the most famous names in personal finance. He has published 10 books, many of which are New York Times bestsellers. His book, Living Large in Lean Times, hit number one on the New York Times bestseller list. His website gets more than 50 million views a year. He's the former co-host of Evening Express on CNN Headline News, now called HLN, and he was also

the host of a weekend show on HLN. But of course I'm leaving out the thing that he is perhaps most famous for, which is that he hosts a syndicated radio show. It's called The Clark Howard Show, and it airs in hundreds of radio markets across the nation. This is Clark's second time on this podcast. He was a guest in episode 47, which we'll link to in the show notes, and in that episode he shared his fascinating backstory. He began investing in real estate at age 22. He started his own company at age 25, and he sold his company, which he sold his company, which he shared his company, which was a travel agency, and retired at the age of 31. So Clark reached fire. Before it was called fire, he reached fire when he was 31 years old. He sold his company. He moved to

the beach in Florida. And for about four years, he did very little. He enjoyed that stereotypical retirement of hanging out on the beach doing not very much. He shares that story in episode 47. So go listen to that if you want to hear the details about his backstory. But of course, after four years of hanging out on the beach, he came out of retirement and he started his second career as a radio host and best-selling author. What's amazing about him is that he walks the talk and he has become very successful, very wealthy, while leading with a service-oriented heart. During Hurricane Katrina, he volunteered with a team that did medical evacuations. And after September 11th, he joined the Georgia State Defense Force, which is an unpaid,

unarmed volunteer component of the State Department of Defense. He has sponsored the construction of 74 houses through Habitat for Humanity and sponsored a program that gives toys to low-income children. He's helped more than 150,000 children get toys at Christmas time. So he is really a perfect example of life after reaching fire. And in this episode, he's going to talk to us about what he loves about fire and what advice he would give to people who are interested in pursuing it. So here is Clark Howard. Hey, Clark. How you doing?

I'm fantastic. How are you? Wonderful. It's so great to visit with you again. Thank you so much. I enjoy the first time that you were on the show, which was about two years ago. And so I'm really glad that you're back. Well, we were in San Diego. I love that town, and it's supposed to be sunny there all the time.

and it rained the whole week we were there. Now, I want my refund. It was just not right. But I did get to go to In-N-Out Burger three times while we were in San Diego. I hope you're not a vegetarian. Remember, I saw you in an Out Burger. I ran into you on one of those three times. Yeah, because you were in an Uber lift, and I was doing Uber Fool.

And, yeah, I remember. Clark, I suppose I should start this by asking you the question that I have, inadvertently become well known for asking, which is, have you heard of the fire movement? Yes. Financial Independence retire early. I love it. I think it's a great thing to motivate people. And it speaks to so many people in a way that that really never has to a large group of individuals. Let's talk about that for a while, because I loved what you said on your show after some of the drama of the past few weeks, where you said it was hard free to understand how anyone could object to the notion of saving a large percentage of your income if you're able to do so. Yeah, it blew my mind because if you look at other cultures,

particularly in Asia, it's very common that people save a third of what they make, 50% of what they make. There's not government support for people who hit hard times in a lot of Asia. And so it's just built into the culture that you know for every equivalent of dollar you earn that you need to save 30 cents, 40 cents, 50 cents. And people just live that way. We're different. You know, the average American saves like three cents of each dollar they make. And that frustrates me no end. I want us to take more personal responsibility for our own financial well-being. Why do you think that the fire movement has motivated people to do that? Given how, I mean, you've been trying to encourage people to save for decades. It's always been an uphill battle. What is it about the fire movement that resonates with people and that motivates that savings? Well, I think it has to do with what happened last decade.

The banking scandals that led to the Great Recession, that led to so much hardship for so many people, people losing their homes, having their cars repossessed, extended periods of unemployment. I think a lot of people, particularly those that were teenagers seeing this happen to their parents, things like that affect you for the rest of your life. I think a lot of people learn from the Great Recession that a reset was an order. There are a lot of people who don't want to be vulnerable, that they're one paycheck away from extreme poverty. And so it's not, it's certainly not every American

is making this pivot. But it's exciting to me to see people out of what was a terrible time in American history and so much hardship on so many people that there are those that came out of that saying, you know what? I'm going to live a different life.

I'm not going to live an insecure life. I'm going to be in charge of my life and I'm not going to have to spend my whole adult life working for the man. That's an expression, by the way. I've heard that recently. I recently became acquainted with that idea that it's the combination of the Great Recession followed by the ensuing bull market that has enabled the fire movement. Now, in your answer, you mentioned the Great Recession.

Do you think that the bull run that we've had for the last nine years has also fueled this? Only in part, because if you think about what I said with most Americans save only three cents of each dollar they make, it doesn't matter how much the market goes up if you're putting no money aside to grow. It's also true that people may be being a little unrealistic based on the fact that the stock market is quadrupled since 2009, that they think, oh, I'm just going to put this money aside, I'm going to extrapolate that I'm going to have these same kind of earnings for years to come. The easy earnings in the market are over for now. And so it goes back to the core that it's living on less than what you make is what creates financial independent. That investing is part of the picture, but it's not what create the wealth alone. It's that you set out to live on every other paycheck or that you're going to save 30% of what you make or 40% or whatever number. It's got to be a pretty big number if you want to create financial independent at an early age.

But the magic of living systematically on less than what you make is at the core of what creates success, because it means even when you're not working anymore, accumulating that well, you need much less money to live on because you're living a more conservative lifestyle, a lower voltage, lower cost lifestyle. Is there risk, quote unquote, risk associated with that, the risk of living more frugally than you otherwise would have to? That's one of the criticisms that I hear of the fire movement is, are you going to reach your 60s and regret all the spending that you didn't do? I don't know anybody who's made happy by the possessions they have, but if you miss a lot of experiences that you would enjoy, maybe you've been too cheap with yourself. because really experiences over our lifetime are what we treasure, what we hold on to,

you look at when people post their artificial version of their lives on Instagram or other social media, it's always experiences they're doing. Nobody's taking a picture of the new TV they bought and say, look what I got. You know, what they're doing is look at this cool place I'm at, look at this trip I'm on, whatever. it is experiences and time with people that creates the joy in our lives. And I don't want you to live, like sometimes I'll talk to somebody who's being so extreme with their frugality. I'll stop them and I'll say, are you allowing anything in your budget for you to have joy in your life? And I'm usually met with dead silence because that's something that is a way it's not normally thought about by people presented to them.

that if everything is about sacrifice with no specific goal in mind that gives you joy along the way and joy at the end, that the goal is to create the financial independence so you can make the choices in your life you want to make, it has to be about more than just, well, I'm sacrificing. Why are you sacrificing? Well, because I'm sacrificing. There's got to be a real purpose in mind that makes it worth doing them. During the now infamous Susie Orman interview.

She lives in New York, you know? Her expectations are different about how many zeros you have to have, you know? That was painful when I read her quotes to you. I got to tell you. And I've known Susie for a long time. and it was like fingers on a chalkboard when I was reading those quotes. It was shocking to hear. One of the comments that she made, she kept citing her age.

She's 67 years of age. And she kept citing that as a form of credibility, stating that she understands things that somebody like me in my 30s doesn't about the nature of spending, especially as you get older. Clark, how old are you? I'm 63. 63. Okay, so please enlighten us, if you will. How do we, especially those of us who are interested in financial independence or extreme early retirement, how should we be thinking about our 60s?

Okay. So, you know, I retired the first time when I was 31. And I had been very fortunate to do that. And in my era, we called the equivalent of what the fire movement is, we called it being a max save. A what? A max. Max. Max. Max.

Max. A max saver. A max saver. From when I was a max saver from when I was 21, I lived on every other paycheck. And I was in a position to be able to retire at 31. I moved to the beat because I'm a water baby. I just had to be at the beat. And I loved that.

But it was my choice to go back to work. And I work because I want to. That's the beauty of the fire movement. Susie was really focusing on. So you're going to save all this money and then you think you're going to bag life at 32 and you're just going to do whatever the rest of your life. the kind of person who's motivated to save, save, save, to create financial independence,

it's about having the freedom to make the choices you want to make in life. It's not necessarily, although for a small number of people it may be, that they're going to bag work at 32 or 34, 41, and never work again. That's usually not. Somebody who's industrious enough that they save, enough that they were able to create the independence financially, that's really what it's about.

And retire has all different definitions. So it may be that maybe you were working in a corporate America job and you were saving money like crazy. And what you really want to do and what you really love is Pilate. And you'd like to be a Pilates instructor. And you never could have made the money being a Pilates instructor. You could in corporate America. but because you save so much and created financial independence,

you bag the corporate job and you go teach Pilate or whatever it is. And so the money is not the central goal. The money is creating the independence to do what you love as an avocation and potentially as a vocation. Do you think it would be accurate if in the fire context, retirement was sort of another word for a well-funded career change, or does it go beyond that? I think it's fine to call it fire, because there are people who, I mean, I consider myself to have been retired once, even though I work, I retired and I goofed off, and I didn't really work in any significant way for four years after I retired. and I went back to work because it was fun to work.

And when it's not fun anymore, I won't work. And so after not really working for four years, I only worked because I wanted it. And to this moment, 63 years old, I work a lot, but I only do work that brings me joy. And any money from it is just almost irrelevant because I created the financial independent when I was so young that I really never had to work.

So when you talk about fire and you're looking at it from the Susie Ormond prism that, yeah, this financial independence part, okay, but the whole thing I retire early, that's bogus. It's not both because maybe in the way Susie was looking at it, it made sense to her. but to me, retire early means that you created freedom for yourself. And you created the ability to do what you wish with your life. And whatever that will be, one of the issues is health. And at 67, or Z-63 for me, that's an issue. How do you handle health if you retire really early?

And that's something that in our American system, we don't have well thought out, how people provide for their health, how they do insurance and all that. So that is a question mark how you do it. I have cancer. I was diagnosed almost 10 years ago. I'm in many ways, historically, I would be uninsurable. So that is a factor that I have to deal with. but it doesn't negate the fact that I created independence in my life and I work doing what I love. And if I don't want to work, I won't work either.

Tell me about how you handled that and how you recommended people handle that. You had cancer. If that was 10 years ago, that was before health insurance had the, yeah, the preexisting condition. So I was 53. And with my radio show, I've always. been able to get benefits through one of the big radio companies. So I ended up with something that with cancer, I was not having to worry about how it was going to be insured. And looking forward, you know, we may have an issue with preexisting conditions, people being covered for those.

There's so many uncertainties in life. You can't account for every possibility and don't allow, worry about how you're going to get health coverage or something like that to keep you from the goal, from the target. The target is to create breathing space in your life, to create financial independence. And to do that, if you've really come into the whole idea of the fire movement based on the run-up and stock, I want you to really step back from that and know that you've got to do the hard work. It's got to be about you saving a huge amount of what you make and you cannot count on stock market gains being what's going to fund that financial independent or the ability to retire early it's got to be habit built on you living a more frugal

life and living on substantially less than what you make and the power you get out of that is you when you create the freedom in your life to save enormous sums of money, it creates freedom from fear. Let's say you're working at a place where people are facing layoffs. There are rumors of layoffs, even in a strong economy. People get laid off all the time. If you have been saving a huge amount of money, you're not afraid about where you're going to make that rent payment from or pay that mortgage or make a car payment or whatever because you have been living your life where you're living in a way that you're not creating financial insecurity.

So do you see fire as the next progression as you move from financial insecurity to stability and then to freedom? Yeah, whatever you call it, and I love the coin phrase fire, because it's so easy for people to grasp that the idea of the goal is not easy to achieve. It's like for people that are overweight and aren't exercising. You know, that taking on that dual thing of starting an exercise program, watching what you eat, losing weight, getting to where you got healthy blood pressure and all that, those things aren't easy. And this isn't either. But the result are so valuable. And that's why I encourage you, even if you start to try to live a more frugal life and you fail one, you try again. fail twice, you stay at it because lowering the anxiety and financial pressure in your life,

I can't even put a price on it or a value on it. It's so great for your mental well-being and even your physical well-being. So many people report enormous layers of anxiety when they owe people money that you eliminate when you don't owe anybody any money. Absolutely. And you know, I despise debt. I don't carry any debt of any kind. And it has served me so well all through the decade. Absolutely. I love your story. The first time that you came on this show, we talked quite a bit about your personal story, how you started a travel agency when you were 25 and sold it by the time you were 31 and that was what allowed you to retire early. Would you, would you recommend that that somebody who wanted to reach financial independence or become fire, would you recommend

that they also take an entrepreneurial route the way that you did? Most of us are not wired to be entrepreneurs, but if you are an entrepreneurial personality, you have to take a lot of risk, but you also have to love running your own business. And I do love that, just for to who I am. And there is no one path to creating that breathing space in your life that will ultimately lead to financial independent. I just got lucky because I was hitting all the checkmark without even realizing it and hit a point by 31 where I was on easy street forever. I mean, how great is that? And so everything worked for me.

but for each individual, they'll have to find their own path, but the core is regardless of how you want to get it done, no matter what tricks you hear, no matter what methods other people use, the core is always, always, you have to live on less than what you make. I mean, I have a relative, not going to say which one, but I have a relative who's always looking for the quick store,

the kind of person who always thinks that some new fad, some new thing is what's going to lead to incredible wealth. The reality is there's not going to be the quick store. It's not going to go being about going to buy a lottery ticket to win a huge pot of money. It's all about what's in our, our heads and our heart and our relationship with money. I know talking about relationship of money is kind of touchy-feely, but there is a relationship with money. And I have a son who's 11, I'm sorry, who's 13. Oh, he would kill me and I just gave his wrong eight. But my 13-year-old son

is one of those people who spent every dollar that's ever going to exist in his life before he's made. He's just a spender. And I don't know if there will be something at some point that will trigger a change in that personality. But it's up to him. You know, he knows my deal. He knows how I am about money. He's very different. And it will be up to him at some point to realize, if he will, that it's up to him to not have so much wantitis and learn that the eye should be on the prize and the prize is financial independence, not what you can possess.

If he was sitting here with me, he's really self-aware. He'd say, yeah, I just don't know how to stop myself. I just want this, and I want that, and I want the other. Every time he makes money, he spends it. So then what would you tell him or anybody listening who's in their 20s or 30s or 40s who's like him, who maybe wants to want less, wants to be less of a spender? How do you mentally make that transition? It's the reason why I said losing weight or eating better are two things that almost all of us know we should do, but we just can't seem to bring ourselves to do. people know that they would like to not feel financial threat.

But you have to want that financial independent enough that you're willing to start making changes in your life. And I think it starts with someone who's a real spender and they're far from what we're talking about. It starts with putting money aside automatically. Every pay period, if you work at a cost, company that has some kind of retirement plan, and if they don't, that you automatically are putting money every pay period or at least every month into a Roth IRA, that it starts

with changing your habit, building your habit, to where you learn in step by step how to save instead of how to spend. Pretty dull stuff, actually, to get somebody. No, really, it is dull. If somebody is a spendaholic, you start with little baby step to get them to piece by piece pull back from being a spendaholic. The health analogy is very fitting because it often happens one meal at a time, one snack at a time. Exactly. And you didn't know me then, and you probably don't know this, but I used to weigh substantially more than I do now. I weighed 40 pounds more than I do now. I didn't know that.

Yeah, I'm 175 pounds now. I'm 5 feet 11. More than 10 years ago, I was 250 pounds, 15 pounds, 215, and I was 6 feet. I've shrunk an inch over the more than decade, but I've shrunk in pounds by 40 pounds. And I did it slow and steady. And I did it by going to tight count. counting of calories. A lot of dieticians ate the whole calorie counting thing, but I started counting calories and I weigh myself every single day of my life. So even though I've been at a good weight

for more than a decade now, I still weigh every single day. Today I was 175.4 pounds. Don't You've got the point four. And so for those of us who have a tendency to go one direction when we'd really like to move our life another direction, it really requires kind of like setting up rules for itself. And don't try to do too much at one, but take on one goal after another, micro goals, I guess you can call them. so that ultimately you get to where you're achieving the goal you really want. For me,

it was to be much more fit because I love athletic and to be able to engage in those a lot more and to generally be healthier and like what I looked at in the mirror. For other people, let's say it involves the stuff we're talking about

with money. If you were in a place where you're kind of shaming yourself about how you handle money, try to take on little teeny changes that are measurable and move those along. Because you can't go from where you're a spendaholic to where suddenly you're financially independent. Right. It requires a lot of small steps along the way. And changes. You have to be flexible, particularly if you want to be part of the fire movement, how you're going to achieve success may change over time. You know, people who,

during the real estate bus last decade had the guts to start acquiring rental property, a lot of those people who had lived on less than what they make had money available when bank loans weren't really available, bought properties have seen enormous increases in wealth sent. So you build the base with the money you save that then makes the opportunities you can seize on available to you. And those opportunities change over time. Right. That's exactly what I did. And that was what set me up for having a very good life in my 30s. Isn't it great? You accomplished so much in your 20 that now created the opportunity for you to teach others and to live the life you want to. And you can do that for the rest of your life because you built. You

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That's shipstation.com, S-H-I-P-Station.com, enter Paula. Ship Station, make ship happen. One of the points that Susie brought up is that there are often extreme black swan, I shouldn't say there are often extreme black swan events by definition that they don't happen often. But there could be extreme black swan events, a permanent disability or a loved one who suffers a very prolonged terminal illness that requires round the clock care. how does a person, really any person, whether they're fire or not, how does a person prepare for those types of events, financially speaking? Well, you know, life always throws curveball. And so you said fire or not. I want to address it both ways because if you're part of the fire movement and you're living on less than what you make, you've created more space in your life.

to be able to deal with an emergency that would happen, let's say in a family or with a loved one, and you're called upon to be the one to pitch in and help, or you are the one able to pitch in or help because you've been on this path towards financial and. But as part of that, I like for you to make sure you have proper insurance of various types. and having proper insurance is something that is so overlooked and does not generally take a lot of resources away.

And that's whether you're working or you're not. Some of the insurance products are harder for you to be able to claim against if you have fully completely retired. As an example, disability insurance. But often it's not your own disability. It's the disability of someone. health where you're stepping into health. In most cases where somebody has to deal with a tragic circumstance going on or an emergency, a health emergency or whatever, they're already living on fume. And it's an event that is catastrophic financially in addition to dealing with the human

aspect of. So having built financial space in your life, and going on a path towards financial independent really does help with the unexpected event. What types of insurance do you think a person should take out? You mentioned long-term disability. Do you think also long-term care? Long-term care is something that I punt for someone's life until they're in their late 50s or early 60s, because there's so much life between where most of us are age-wise and the point where it becomes really a priority to worry about long-term care. If there are others that depend on you, having term life insurance is a high priority. Very few people have it. And if you're in a relationship

with a significant other, you're married, whatever, you've got to have a will. So many people die without a will. And so many people now live together. without being married to their partner, if you don't have a will, that person gets squeezed out and squeezed out hard. And so family that someone may not even like gets their stuff instead of the person they've devoted their lives to. So there are a simple checkmark of things that aren't hard to do. Don't take a lot of money.

Don't take a lot of time. but let's face it, or kind of boring. But taking care of those boring items can be essential at certain moments of your life. One other thing I'll mention, and I hate to mention this one too, but I got to, is making sure you have a health care directive, especially if you live your life with someone you're not married to, you want that individual to be your messenger and be your, the representative who's there to carry out your wishes. And these forms are generally state-specific, usually official forms. You can just Google Advanced Healthcare Directive with your state name

attached. And you'll take care of that person or have them take care of you in a way they can't otherwise if you haven't done that simple paperwork first. Right. Absolutely. My parents That's pretty dull stuff, isn't it? Yeah, you know, it's the stuff that in hindsight you're glad you've done. And you started, I stepped over, you were starting to say something about your parent. Oh, just that my parents actually recently sat me down and showed me their medical directives and gave me all of the instructions for what they would want me to do in the event that they couldn't make decisions for themselves. My mom, when she was alive, I sat down with her while she did her form. And I didn't know what my mom really wanted.

And every question that had to do about keeping her alive, she was like, no, no, no, no. And that was great because I knew what she wanted. I didn't have to be a mind reek. Right. And then you don't have to second guess that. Right. I'll tell you something very personal. My mom had a massive heart attack when I was out of the country.

I was her representative on her forms, and none of my siblings would pull the plug on my mom who had an irreversible, I mean, she was done. She was brain debt. So we arranged a phone call, and I did this satellite call with the doctor, and he said, what do you want to do? And I said, I want to execute my mom's wishes, which is to discontinue all care. And he kind of nervously laughed, and he said, That's what your two brothers and your sister said you'd say. So that's what we'll do. Because she had that health care directive, it was clear what I was supposed to do. And I carried out her wishes exactly as she said. Wow. Did that inspire your siblings to set up health care directives of their own? I have no idea.

We haven't talked about that since that day, especially since two of them wanted to keep doing all kinds of interventions. it was best that we not address that topic anymore because they were a little sore at me for doing what we wanted. But at least it was written so that you could point to what was written down and say, hey, this is what she said. Oh, they had it. They had it there. They still, still I would say it since I was her appointed messenger.

So I would say it, they weren't going to do any. That's why doing these things, because the dynamics of family never cease to surprise when we get into a situation. You never know in a good situation or bad situation. Think about when we're with people at Thanksgiving or Christmas, and they behave an unusual way. You know, you never can underestimate how weird people are going to behave in a good circumstance or a crisis.

And that's why making these decisions for yourself is so key. Are there any other issues? The Susie interview brought to light that perhaps the fire community may not have spent enough time thinking about issues like long-term care, long-term disability, wills, trusts, advanced health care directives. Are there any other issues that people commonly overlook when they're thinking about managing their money in their life? Okay, this is going to sound so weird.

People who are trying to adopt a lifestyle where they can. move towards fire. I don't want them to get shut down by any of these details we just talked. Don't worry so much about the what if. Of course, the things we just talked about are things somebody should do, but it's not the heart and soul of what the fire movement is about. It's about creating by your choices the ability for you to be financially independent. And so that's where I want your energy, your brain power, and your effort to go is towards the idea of living substantially less than what you make so that you create the opportunity to then have to worry about all the paperwork kind of things we were talking. Exactly. And that paperwork is a lot

easier to deal with when you don't have to iron a shirt and then commute to work. 100% correct. The goal is, is to create the freedom in your life. And that's where the effort and energy have got to go. And let me tell you something. When I was in my 20s and right out of grad school, when I started living on every other paycheck, when I was 21 or 22,

and then I used that money to start my own business when I was 25. And I knew my goal was to retire by the time I was 30, and I missed it, and I did it at 31. I wasn't thinking about, well, I've got to make sure I have proper life insurance or I haven't done a will yet. I was only focused on the first part and that's where you should be focused. And that is what is your plan to live on less than what you make? How are you going to execute that? And the rest of the stuff will take care of itself when you get to a stage in your life that you've created that financial.

and defend. And how did you do it? What were some of the key steps that you took that allowed you to live on substantially less than what you made? When you're a college student, you live on very little. And so when I finished college and I was earning then a decent check out of grad school, it didn't require a lot for me to live on every other paycheck because I'd been living on very little. I mean, part of the time I was in college, my dad was unemployed. We didn't have microwaves, but I lived on a lot of canned food, and I lived an extremely frugal life. So I was already of that mindset, and I was already comfortable with that. And so I didn't ramp up my lifestyle when I finished school and was working in my first career-type job.

that's really where the inflection point is. When you start working, it's pretty easy to amp up your lifestyle to whatever your paycheck. If you catch somebody early enough with the idea of living a financially independent life, doing it before you amp up lifestyle is when it's ultra easy to do what I did. We'll come back to this episode in just a minute. But first, freelancers and small business owners, are you dealing with end of the year bookkeeping stuff like trying to generate profit and loss statements and trying to figure out tax stuff and worried about the fact that tax season is going to start next year and April's going to come up before we know it? There's a good chance that you're trying to dig your way out from under a pile of receipts and spreadsheets. So please do yourself a favor.

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to claim it, go to freshbooks.com slash Paula. And when they ask, how did you hear about us, type in, afford anything. Again, for 30 days, free trial unrestricted, type in freshbooks.com slash Paula. And when they ask how you heard about them, mention afford anything. Freshbooks.com slash Paula. Do you end up not wearing some of the clothes you buy because it just doesn't fit right and you mean to take it back to the store, but then you never get around to it? So then you're stuck with stuff that you paid for but that you don't wear? Yeah, me too. That sucks. So take this dress out of getting dressed by checking out Litoat.

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go to latote.com. That's L-E-T-O-T-O-T-E dot com to get started. Enter promo code Paula at checkout to get 20% off of your first month. Again, that's L-T-O-T-C-E-C-E-T-E-O-T-E dot com. Intercode Paula to get 20% off your first month. Under what circumstances or under what decision-making matrix does some degree of lifestyle inflation become justified? Because certainly you don't still live like a college student. So how did you decide to make those incremental increases to your lifestyle? This is going to start to make me sound a little irrelevant, but I will lay it out for you. I have managed to build up enough money

over the decades that we live a very luxurious lifestyle today. We live in a very high-end home that we own for cash. We have a vacation home on the ocean. We own for cash. We travel as we wish. What I was able to do is, as I built up well, it meant that as long as it didn't involve going into debt, we had the freedom to live with more and more luxury,

if you will. But I'm still in so many ways, the same person I was then. I don't like to pay for parking. When I'm traveling somewhere and I don't have a rental car, I travel at Uber Express Pool or Lyft line where I'm sharing rides with other people because I don't want to spend the money.

I was in New York working last week, and I was on expense account doing television in New York. I rode the subway when I could have ridden in a black car or whatever because wasting money just, doesn't make sense to me. I get excited when I go to Dollar Tree. I use coupon. So a lot of me is wired just as it always has been. But remember I said the very beginning, you have to have a goal. What are you trying to achieve? And when I retired, I moved immediately to the beach because that was what I wanted. And I've lived at the beat full time or part time for the last 32 years.

because that was what for me was the goal I wanted. So it's not about living a life of frugality forever. It's about living a life that affords you the choices you want through your entire lifetime. That's perfect. Clark, is there anything that I haven't asked that you would like to emphasize any final messages that you want to share with the audience? No, but isn't it funny that I ended at the same class envy thing? that Susie Ormond was at. But she's 67, I'm 63, and we've achieved that where we could live that independent

lifestyle. So I hope it made me not less relatable. There's a big difference between buying a couple homes in cash while because you've thought very critically about what are your highest priorities and values and what would really allow you to enjoy your life. What you've done is you've identified what's important to you. You spend your money there. And then you also identify what's not important to you.

And you don't spend money there. So even on an expense account, you'll ride the subway. As we covered at the beginning of this interview, when we were in San Diego, you went to In-N-Out burger three times, where you easily had the money to go to some fancy Southern California restaurant. But you prefer In-N-Out burger. Why wouldn't you eat there? Exactly. And we're flying to California tomorrow at five hour, 15 minute flight. And we're going on Southwest because it was the cheapest. And I'll line up in the AB&C group like anybody else. And that to me is the smart way to spend money because I'll buy something that has long term value. And I will spend more money for it and I'll invest. But I won't.

spend on normal lifestyle, normal thing. And people will come up to all the time. It's so funny. I would tell you probably two out of every three flights I go on. Somebody comes up to me and says, I can't believe you're sitting here in coach. And I always give pretty much the same response. I can't believe you don't know me well enough to know that I would be sitting in coach. Absolutely. Absolutely. You know, I remember Clark when we met in San Diego, one vivid memory that I have of you was you had your merchandise like hats or various other items with the Clark Howard logo on it. And I remember at the end of the conference, you gathered up the stuff that hadn't been taken. And you personally did this. You personally gathered the stuff that hadn't been taken and repacked it so that it wouldn't get thrown away. way, it wouldn't go to waste. So true. That is a true story. And we handed out those hats that we had not given out at the conference. We handed them out at so many different events. That way, we were able to spread the words so many other ways. Instead of looking at it as disposable money,

my money is never disposable. Right. Right. And it was such a perfect example of the way that you walk the talk. I mean, the monetary value. of those hats that you gathered up, I imagine couldn't have been more than $30, maybe $50 at the most. Oh, no, they were sadly more money than that. Okay. Well, even if it was $200 or $300, depending on the number of hats that were remaining, you weren't going to just let that go to waste. Oh, and by the way, if they had been only $20 or $30 worth of hats, I still would have

collected them and brought them back. Exactly. So a lot of people think that this is a schick. It's not. I mean, it's who I am to my fault. Oh, yeah, I certainly got that from talking to you. You also mentioned, oh, you mentioned something about you'd made arrangements for your own, was it that you made arrangements for your own cremation or your end of life? Something about funeral expenses so that your family wouldn't have to pay for funeral expenses. Yeah, donating my body to science so that then there's no funeral cost. Yes, yes, I remember that. You made arrangements to donate your body to science so that your family wouldn't have to pay for funeral costs. And hopefully all my vital organs will be good enough, at least my eyes, to transplant into people so that other people will have hopefully the gift of life or the gift of sight.

Absolutely. It's a win-win. Right. Well, thank you so much, Clark. That's one of the things I love about you is how authentic you are and how you have. live frugality, but not frugality in a vacuum, frugality in the context of your personal priorities. Exactly. I got to tell you, you made a great impression on me, and I'm glad I made a great impression on you. And we're both of like mind, and being genuine is a currency that is so valuable, and you're so lucky that that's who you are and that's what you have, and you've got that

brilliant mind of you. So all that's going to serve you so well. over time. Thank you so much. I really appreciate that. What are some of the key takeaways that we got from this interview? Here are four. Number one, we are social creatures. Our attitude and behaviors towards savings is very culturally influenced. The level of savings that we consider to be normal is highly influenced by the culture around us. If you look at other cultures, particularly in Asia, It's very common that people save a third of what they make, 50% of what they make. There's not government support for people who hit hard times in a lot of Asia. And so it's just built into the culture that you know for every equivalent of dollar you earn that you need to save 30 cents, 40 cents, 50 cents.

And people just live that way. So how do we apply this knowledge to our lives, given that the majority of people who listen to this podcast, live in the United States, which does not have norms that are heavily around saving. It does not have a culture of saving or a culture of debt aversion. How do we apply this knowledge? Well, you might have heard the quote by Jim Rohn that you become the average of the five people that you spend the most time around. You can influence the cultural forces that apply to your own personal life. So if you want to save more money, if you want to avoid debt, if you want to invest more or become entrepreneurial, surround yourself with people who encourage that mindset.

That's why it's so important that fire become a thriving subculture. And that's why it's so important that we as a community interact with each other, both online and in the real world. This is where we have an opportunity to create a culture or a subculture around reaching financial independence. So that is key takeaway number one. Key takeaway number two. A bull market is irrelevant if you're not saving and investing. Most Americans save only three cents of each dollar they make. It doesn't matter how much the market goes up if you're putting no money aside to grow.

There are many people who will downplay their own success by saying, well, you know, I mean, I got lucky because the markets were good. That's true, but that's not the only truth. that's kind of like playing soccer and scoring the goal that wins the game and saying, well, you know, I got lucky because at the moment that my teammate passed me the ball, I happened to be in exactly the right position and everybody on the field was in exactly the optimal position where I could kick that ball into the net. Yeah, that's true. But you were in the right position because you trained and you practiced. And at a minimum, you woke up that morning and put on a jersey and some shoes and got out there on to the right position. the field. So yeah, that game-winning goal might have been luck to an extent, but that luck was predicated on the fact that you were in the game to begin with. And so key takeaway number two is

get in the game. We have no idea what the markets are going to do in the future, but guess what? A bull run is not going to help you if you're not in the markets to begin with. And this applies both to index funds and real estate. This applies to any type of investment. This also applies to starting your own business and investing money back into your own business. All of those are examples of being in the game. So that's key takeaway number two. You can't win if you don't play. Key takeaway number three.

Retire both early and often. And what I mean by that is don't get so caught up in the goal of early retirement or financial independence that you miss the fun and enjoyment and meaning that occurs throughout the journey. Even if you're not FI yet, travel now, or take that wine tasting class, or fly across the country to spend Thanksgiving with people that you love and people that are awesome, don't defer your happiness and defer your experiences until a later date. I don't know anybody who's made happy by the possessions they have, but if you miss a lot of experiences that you would enjoy, maybe you've been too cheap with yourself. Because really experiences over our lifetime are what we treasure, what we hold on to, you look at when people post their artificial version of their lives on Instagram or other social media, it's always experiences they're doing.

Nobody's taking a picture of the new TV they bought and say, look what I got. What they're doing is look at this cool place I'm at, look at this trip I'm on, whatever. It is experiences and time with people. that creates the joy in our lives. You know, someone once emailed me and told me that they want to backpack through South America. They want to take some time off and go travel around, see Patagonia, experience all these cool things. But they keep getting caught up on the fact that if they took that same amount of money and invested it, then compounded over the next 40 years, it would come to a heck of a lot more. And so this idea that they're missing out on compounding gains is holding them back from backpacking around South America.

And so they emailed me asking for my take on that, my advice. And I told them as politely as I could, dude, you're missing the point. All the compounded gains in the world are not going to do anything for you if you're 110 years old. and physically unable to have the same types of experiences that you could have in your 30s or 40s or 50s. So, sure, if the question is, should I buy this crazy flat screen TV or should I invest in the market, I think you can guess what I'm going to tell you the answer should be. By the way, do you like how in the example I say flat screen because I actually have no idea what the latest technology in TVs are? And so I'm clearly living like 15 years in the past where flat screen is the big thing.

So if the question is, should I buy some fancy newfangled television or put money into the market or save that money for a down payment on a rental property? I think it's clear what that answer is going to be. But if the question is, my three best friends from college just invited me to spend a week with them in Italy. And I have the cash to do this. I wouldn't be going into any debt for it. And I'm adequately saving for retirement. I'm financially stable. Should I do it or should I get the additional compound interest? I mean, man, go to Italy. Have that experience. Go to Italy. Be with your friends. Create those memories because at the end of the day, that's all you ever are going to have. So that's key takeaway number three. And finally, key takeaway number four, don't get so afraid of Black Swan events that you end up reverting to the status quo. people who are trying to adopt a lifestyle where they can move towards fire, I don't want them to

get shut down by any of these details we just talked. Don't worry so much about the what if. Of course, the things we just talked about are things somebody should do, but it's not the heart and soul of what the fire movement is about. It's about creating by your choices the ability for you to be financially independent. And so that's where I want your energy, your brain power, and your effort to go is towards the idea of living substantially less than what you make so that you create the opportunity to then have to worry about all the paperwork kind of things. Yes, catastrophes happen, absolutely. But the normalized American pattern of going into consumer debt saving 3% of your income and woefully underpreparing for even a traditional retirement,

that's not the solution to the possibility of a future calamity. Being in a very financially secure place in your life, while simultaneously not indefinitely deferring your happiness and your experiences towards the future, that balance of retiring both early and often, that is the way to prepare for any eventual. So those are four takeaways that we got from today's conversation with Clark Howard. If you'd like a written summary of these four takeaways, go to afford anything.com slash episode 158. That's afford anything.com slash episode 158. That's where you can get the show notes. And when you're there, leave your email address and we'll send you once a week the show notes for all of our upcoming episodes.

By the way, also, when the now infamous Susie Orman episode came out, Clark immediately issued a response to it on his own syndicated radio show on the Clark Howard show. He came out in support of the fire movement and he talked about it on his show. So in our show notes at afford anything.com slash episode 158, we've included a link to that episode as well as the timestamp. So you can listen to what Clark said on the Clark Howard show about the fire movement. And don't forget, if you want to hear his personal story, his backstory, which is fascinating, head to episode 47. We'll also link to that in the show notes as well. A few notes. First of all, huge thank you to everybody who has left a review of this podcast on iTunes or Stitcher or whatever app that it is that you use to listen to podcasts.

Thank you so much. We now have 979 ratings on iTunes on the Apple Podcasts. Thank you. That is incredible. Please help us, if you haven't left a review yet, please help us get to $1,000. We have $9779. We're so close. I would love to hit that four-figure mark as hopefully by as early as next week.

So please, if you go to Afford Anything.com slash iTunes, that will redirect you to the page on the Apple Podcast website where you can leave a review or a rating. Number two, if you missed the announcement in last week's episode, I am thrilled to announce that we, the Afford Anything community, reached our goal of sponsoring a water project such as digging a well somewhere in the world. As of the time of this recording, we have raised $12,882 as a donation to charity water. And that money is enough. We needed to break the $12,000 mark and we've done it. So that is enough money that we afford anything. We'll be sponsoring a water project.

That's enough money to build a well so that people in the money. that community won't have to deal with the diseases that come from drinking dirty water like cholera and dysentery and diarrheal diseases. That's an incredible legacy that this podcast is leaving. So thank you so much to everybody who is donated. If you want to support the campaign, head to Afford Anything.com slash water where you can leave a donation or go to Afford Anything.com slash store. That's where you can buy a shirt and 100% of the profits from the sale of those shirts will be given directly to Charity Water. Coming up on future episodes of the Afford Anything podcast, well, first I'm afraid I have a little bit of bad news.

Now, if you remember in a previous episode, I mentioned that I was going to be interviewing my good friend Patra. She and I met while we were traveling. We met back in 2009 in Indonesia. And as I mentioned on a previous episode, she supported herself from her investment portfolio while traveling the world for a dozen years. So I was really excited to be able to share that story with you. Beyond that, if you kind of take a step... upwards and zoom out a little bit. One of the things I was really trying to do with that is I'm trying to highlight stories of people who are not bloggers and not podcasters, people who are not publicly known.

Because one of the criticisms that I sometimes hear about the fire movement is the question like, well, what? Does everybody just reach fire and then start a blog? No. But sampling bias might make you think that because by definition, the people who are public. about it are the people who stories we hear. And so one of my goals with this podcast is to bring to light the stories of people who are not public about it. One of the ways that we did that was in episode 139, I interviewed my good friend Kim. Now, Kim has not reached fire yet, but she is saving more than 50% of her income as a firefighter. So she earns a firefighter salary. She's a firefighter

for the city of Austin, Texas. And she saves more than half her income. She's well on the have to fire. We featured her story in episode 139, and I was going to feature Patches as well, but she has recently decided that she actually does not want to come out publicly with all of the details. So we, unfortunately, I know I promised you that that would be coming up on a future episode, but unfortunately, we will not be airing that. And that, it kind of brings to light one of the inherent problems with trying to share the stories of people who are not public about their finances and their life is that people who are not public about it are often people who do not want to be public about it. They're people who value their privacy. And, you know, even with my friend

Kim in episode 139, you'll notice we didn't give Kim's last name. So there are many, many people who have reached fire who are doing super cool things. They're volunteering full time. They're rock climbing. They're surfing. They're leading these fascinating lives. But We don't hear about them because they're leading private lives. They're not blogging. They're not podcasting. So as much as possible, I'm going to continue trying to bring these stories out while also recognizing that sometimes people will record an interview and then they'll get cold feet and say, you know, I don't think I want 30,000 people downloading an episode that has all of the details of my life and my money, which I can understand. So anyway, now that we've talked about what's not coming up on the Afford Anything podcast, what is.

What is going to be coming up? Well, this upcoming Friday is the first Friday of the month. It's the first Friday in November. So my friend Joe Saul Seahy and I, former financial planner, Joe Saul Seahy, will be answering questions that come from you, the audience. And then after that, on Monday, I've got an interview with Jonathan and Brad from the Choose FI podcast about the paradox of FI. So all of that is coming up on the Afford Anything podcast. Make sure that you don't miss any of it by hitting the subscribe button in your podcast. your favorite podcast players. So whether you're using Apple Stitcher, Overcast, open up that app, hit the subscribe button. That way you won't miss any of our awesome upcoming shows. Thank you so much for being part of this community. My name is Paula Pan. I'm the host of the Afford- Anything podcast. I'll catch you in the next episode.