BiggerPockets Money Podcast - 147: Pursuing Financial Independence on Her Own Terms with Cathleen Hutchins

Episode Date: October 19, 2020

Cathleen Hutchins grew up in Hawaii. She come over to the mainland for college, but Hawaii kept calling her name, so she moved back home. Hawaii is an expensive place to live, and Cathleen knew she'd need a plan in order to reach financial independence if she was going to live there for the rest of her life. So she saved. She invested. She made smart decisions about her money and is continuously looking for ways to generate passive income to help fund her retirement. She has also sacrificed some comforts and norms to get to where she is today. She and her husband lived apart for a while, both living where there was a job for each of them, not always in the same state! But her sacrificing and saving has allowed her to move home to Hawaii, buy a house, and continue to pursue financial independence in a high cost of living area. Cathleen is well on her way to Financial Independence and her story is just another example of how following the proven path, you can get money out of the way so you can lead your best life. Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums BiggerPockets Money Podcast 35 with Craig Curelop BiggerPockets Money Podcast 95 with Craig Curelop BiggerPockets Money Podcast 120 with Michael Kitces BiggerPockets Money Podcast 144 with Kirk Chisholm Mr. Money Mustache Check the full show notes here: https://www.biggerpockets.com/moneyshow147 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 147, where we interview Kathleen Hutchins and hear her journey to financial independence in a high cost of living area. It almost always comes down to just consistently applying the basics. So you're not buying impulse items all the time. You're keeping track of what your spending is like. It doesn't have to be specific. It can be kind of general. So for example, I check my credit card every week.

And almost all my spending goes on my credit card. So I know how much I spent last week. I know if I spent too much and I need a cut back. Because I'm not going to remember. Everyone keeps thinking, oh, yeah, I'll remember. No, you won't. You have all this other stuff. You have to remember.

You're going to forget that you bought a $200 dinner last week. Hello, hello, hello. My name is Mindy Jensen. And with me, as always, is my intelligently inventive co-host, Scott Trench. Thanks, as always, for the patent introduction, Mindy. Scott and I are here to make financial independence less scary, less just for somebody else. and show you that by following the proven steps, you can put yourself on the road to early financial freedom and get money out of the way so you can leave your best life.

That's right. Whether you want to retire early and travel the world, go on to make big, big time investments in assets like real estate, start your own business, or simply engineer your best life from Hawaii. We'll help you build a position capable of launching yourself towards those dreams. Scott, I am super excited to have Kathleen on the show today. She lives in a high cost of living area, and that's not really a subject that we've covered in a lot of episodes, but a high cost of living area is definitely going to skew your FI number. And she shares today how she has been able to reduce her expenses and alter her cost of living so that just because she's in a high cost of living area doesn't mean that she has a high cost

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Kathleen Hutchins, welcome to the Bigger Pockets Money podcast. I'm very excited to have you on the show today because you are a listener of the show who reached out to me and said, hey, I've got this story about pursuing financial independence while living in a high cost of living area, which is not really a story that we've covered many times. So I'm super excited to have you share your story with us today. Can you start off with where your journey with money begins? Hi, Mindy. Yes, I can.

So I grew up in Hawaii, which is notoriously high cost of living area. It circles back to living in Hawaii. but apparently I've been incredibly frugal since I was a child. I didn't know this. My mom said she used to give us a dollar for an allowance when we're kids to go buy whatever we wanted at the store every once in a while. And I would just sit there for like 20 minutes deciding what to buy because I wanted to buy the most cost effective or get the most out of that dollar.

So then after that, you know, when I was in high school, my mom did a lot of stuff for us to teach us about finances. She would take us to the grocery store and talk about how much things cost, whether or not something was expensive or not, whether it was on sale and should be stock up on it. Mostly food. You know, we have three teenage kids in the house. We're eating them out of passing home. And, you know, start learning how to do things like our own laundry, starting how to cook. So we took over some meals once in a while doing dishes, basic chores that a lot of kids don't have to do. So I had to learn how to sew. I had to learn how to fix the car.

I had to learn how to cook, which didn't really take hold of me until I was older. I thought the only setting you could cook at was high. Apparently there are other settings. So I used to burn everything. But basically my mom taught us all this, and then she had conversations with us about budgets. So we actually didn't get an allowance. We got a monthly budget.

And that covered everything in high school that we needed. So that included bus fare, lunches, school activities. So if we wanted to go to an activity outside of what was already included in the list, like field trips, for example, we walked home or we brought lunch or we didn't eat lunch. So that paid for things like extracurricular tournament of fees. And then on top of that, I don't remember when in high school, but she had an early conversation with us on how much she could afford for college for us. So I had a budget on how much.

And then she says, well, I can afford you to go to this level school. but if you want anything higher than that, you have to get a scholarship. And then I found out she lied to me about my older sister, who she told me, had a half-toition scholarship. So I had to beat that. Apparently it turned out to be only a third tuition. That's okay. Because I think I end up saying my mom three quarters of college tuition. I mean, I'm very lucky that she was able to pay for college for us.

and I didn't have to go into student debt, but I certainly had been encouraged not to take on loans. I don't think loans even came into the conversation at all. Where did you go to college and how did you finance it? Is it a three-quarters scholarship? Is that what you're saying? Yeah. So I went to Marquette University in Wisconsin. It was very cold.

And I targeted schools that had, there were private schools. So they're a bit more expensive when you look at it. But a lot of times they have merit-based scholarships. So I got a half tuition merit-based scholarship my freshman year. But what a lot of people don't realize is that there's still industry or study-specific scholarships you can get while you're in school. So what happens, I also got offered work-study. I ended up work-studying in my department that I was studying for. So I was really good friends with the secretary.

So she was like, hey, there's a scholarship for your area. I was going for industrial engineering. Offered, I believe it was by Caterpillar. Why don't you apply for it? And that actually covered the other half of my tuition. But because I didn't get it until that end of my freshman year, that's why mathematics comes out of three quarters. I also graduated year early. I took a lot of AP courses when I was in high school and took the past.

I made sure that the schools I was applying to accepted my AP scores for credit. And then I took summer school and then I did co-op. So that also brought in money because working as a full-time engineer for every other semester. That's really impressive. Was part of your motivation to finish early because of the extraordinary differences in weather between Wisconsin and Hawaii? It might have been, no.

I think, you know, it never occurred to me when I was planning it out. I was just like, oh, I don't have to take this class. Great. Like, I don't have to take CalC 1. I can just skip ahead to CalC 2. Awesome. I already did this junk in high school.

Why I'm going to repeat myself? And then it just worked out because a co-op program at Marquette is five years because it's a full year of experience. But because I was able to get the AP courses and then take summer school because my mom told me I had to take summer school when I was conditioned as an Asian

to take summer school and winter break school. It was just natural for me to do that. So I was working part-time in the summer when I came home and I would take whatever electives I needed. So I think I took physics and Asian literature studies. So what was your position upon, a financial position and career upon

graduation. So at that point, I got married. So I was able to, between my husband and I, pay for our wedding, which before you go, oh, we spent less than $5,000 for a wedding in Hawaii. And I had a beautiful wedding. So it was pretty good. I think I had, I'm going to say, about $15,000 to $20,000 net worth at the time. As my mom, well, she started me off with that Rath IRA and a taxable vanguard account.

Now everybody knows where I bank or where I invest through. So I already started off with that amount. And this is, mind you, this is after September 11th. So I started a freshman year and then September 11th happened. And I didn't know the password for my account. So it just kind of sat there. So I had great returns because I didn't do anything with it. But right after that, I actually got accepted into Texas A&M for graduate.

school for mechanical engineering. And they offered me, I think it was a stipend of $1,000 a month and full tuition. Wait, they paid you $1,000 a month to go to school and no tuition? Yeah. Oh, well. Yeah, and A&M is super cheap to live in. So my apartment was $500 a month or something. So then you still had $500 a month to live on? Yeah, I still broke because I was like, stupid. And I was like, oh, I can go buy this. Oh, I can go grocery shopping without a budget. H.E.B. Yeah. If you're, if you ever been to Texas, H.E.B. is a fantastic grocery store. It's like a Harris Teter's, but bigger. Oh, I don't know Harris Teter's. Oh, in Colorado. I don't know the equivalent in Colorado. Sorry. It's fancy, but not fancy.

So they paid for pretty much everything, which is really nice. I had to TA for a couple of classes, which was okay. I mean, I like teaching. Well, if you don't have to pay for college, I would TA a couple of classes. You know, this, before we get to... It's one class, a semester, by the way. Oh, wow. A whole class. Oh, my goodness.

That's got to be just... It was great. Before we get too far away from this, I just want to reiterate, you said that you were close with the secretary of the department, and she casually mentioned you should apply for this scholarship. And I can't remember who said that recently. but this comes up a lot. The people who run the department in which you are studying

know about the scholarships that are available that people aren't applying for. Talk to those people. And there's no competition, so they had no choice but to give it to me, no matter how stupid I was. I mean, my grades were good enough to keep the Barrett-based scholarship, but I was not the smartest person in the room. Well, you still were the smartest person in the room

because you got the scholarship. Nobody else applied for it. 50% tuition is 50% tuition that's not coming out of your pocket. I know it's four years and I only went for three because Marquette doesn't charge for co-op time. Oh, that's interesting. Oh, that's very interesting. It's like 72 bucks for the credit to transfer to one whole credit.

But you get paid. I think I paid $17 an hour. So that sounds, you know what that sounds a lot? Scott, that sounds like Craig who did the, except I don't think he got paid for his internship, did he? I think that... That's a difference. Oh, yeah.

I think that his school did something like where you have to like six months in study, six months in a job or internship that is paid, I believe. Oh, it was paid. Okay. Well, that's, we're going down a hole there. Yeah, co-op's very similar to internship, but it has, it must be paid and it must be actual engineering work. So I was working for aerospace company on jets.

Well, that sounds fun. And rockets and stuff. I'm not the smartest person in the room. I'm a rocket scientist. No, I wasn't a rocket scientist. I'm an industrial engineer. I just told people what to do. It was amazing.

Okay, so let's look at how your financial situation was faring at the end of grad school. You said at the end of regular college, you were $15,000 to $20,000 in net worth with, did you have any student loan debt or was that all paid up? Oh, no, it was loan a mom. Loan, yeah, Bank of Mom. Bank of Mom, thank you. So that's a really generous gift that your mom was able to give you. Scott, we should get all these moms on the show, too, and interview your mom and see where she learned all this money stuff.

So at the end of grad school, what did your financial situation look like? I think it was kind of bad. So my husband was working full time, but he was in Houston. So that's like an hour and a half drive each way. and commute. And he wasn't getting paid a whole lot. So he was actually subsidizing all of my stupid spending. Like, I would go shopping and come up. Like, what did I need high heels for? It's in college. I should have been living like a grad student. That was my mistake. But my professor actually wanted me to stay on and get a PhD because they would be had funding

for more research. I end up being a research assistant because I want to get out of the TA thing, the TA gig. You have to do a thesis to graduate. So I needed a lab. I needed a I need a funding to do it. So the professor I studied under, who is the top professor for shape memory alloys in the world, had a spot open. And so I ended up working for him. But when I got out, I was like, I can't go to a PhD. I don't have any money.

I already got offered a job at the PTO at the Patent Tramark Office. So they're offering a starting salary. I think it was $70,000 a year. That's way more money I've ever earned in my life. So you took the patent. When you say PTO, I think parent-teacher organization. Sorry, I know. So you took the PTO job.

You work in the patent office? Yes. That sounds really cool. Sure. I mean, it's great. Please don't fire me if you're listening to this, Dave. It actually is pretty cool, but everyone specializes. And then, you know, on top of that, they don't talk about this.

But we all have production requirements. So this is like, say you had a job where you had to do five podcasts a day. It's fun for a little bit, but then when you're like, I have to do this. What happens if I have a terrible guest? What happens if I have a guest that doesn't show up? Then you're in trouble and you're scrambling, trying to make it up. So that's the bad part of the job. But I think everybody has that.

They don't have an all have a job they love. So what year did you take this patent and trademark office job? 2007. So you can imagine what happened right after that. So I had no choice but to be able to do the job well because there's no jobs to be had for an engineer in 2008. And just to recap, your financial position, you said it wasn't very good, but did you have debt between you and your husband when you started that job? No, no, we didn't have any debt. We just didn't have any money. Oh, okay. So you're saying you could have accumulated, you could have accumulated some wealth what you're saying during your time at Texas A&M.

Right. But you didn't accumulate any debt or put yourself into a hole or anything like. debt. Correct. Yeah, I was going to say she could have accumulated a lot of debt too. So the fact that you're at zero is still way ahead of other people. I'm going to tell you a secret. I didn't have a credit card till like seven years ago. Good. Eight years ago. Good. So I was a college student. I was buying groceries. I'd have my debit card decline because I wasn't keeping track of how much I was spending. And I'd have to like take out things from the cabare bell. Oh, geez. That's okay. That embarrassing situation will teach you so much about budgeting and being smart

with your money. Because that is embarrassing. And why is that embarrassing? The guy behind me in the grocery line does not know me and will never see me again. What do I care that he sees my card gets declined? But when you're there, you're like, oh my God, this is so embarrassing. I guess I don't need this and this and oh, I still don't have enough. It's good because I do that now when I'm, I just watch the total. And if it's about, so I organize by what I need. the most and what's the nice to have. And when I get to the total, I just like everything else I don't need. Please take it back. Thank you. Yeah, I don't do that and I should because I bring a bunch of stuff home that I don't need. That's my big Achilles seal. It's very hard because it's already

people are waiting behind you. And then you're like, that thing should be $2.50. Not $2.73. cents, please re-scan it. People are all mad at. You can't say, like, it's 13 cents. What's wrong with you? Or it's 23, I can't do math. 23 cents. How did your financial position progress once you started the new job?

I assume that both you and your husband were working and you started, you were able to accumulate money as soon as you started the new job? Sort of. So we had, one, D.C. is a much higher cost of living than Texas. I was paying $500 when I was in grad school a month. and then suddenly we're at a $1,700 a month apartment. And I was commuting. I was taking the train into work.

So my husband had a job temporarily. He transferred over. He used to work in making compresses for breathing air. So things for like SCBAs and scuba. And the company he's working for, he ended up having to report them to, I think, OSHA, because they were violating a lot of the safety requirements to do breathing air for SCBAs.

So they ended up firing him, which I think is, illegal, but okay. So he ended up being a stay-at-home husband for like a year. I can't remember exactly when. So during his time, it was just me working. So we were, in terms of not getting, we weren't into debt, but we weren't really saving a whole lot other than the 15% that I was recommended from my engineering economics professor, Dr. Marklin. So it was 15% plus whatever I was saving for my retirement. Because I enrolled in the TSP, which is the government equivalent of the 401K as soon as I

started. And did you max that out? Not immediately. Okay. I did it by steps. You know, when you get a pay raise, you add increase. And then now I'm maxing it out, maxing out for a while now. But starting is important.

Yes, starting is very important. Scott, I love her story. Oh, well, you know, we weren't really doing very well because we didn't save a lot. we were only saving 15% because Professor Marklin told us to do that. And we were only contributing to our TSP as well. There are people who are not saving anything. So you're doing it right. And if you're listening to this and you're about to get your first job,

start with the 401K or TSP immediately. Especially if you get that match. Even if you don't, but especially if you get the match, you absolutely want to do at least to the match. And find the lowest price. of fees you can. So it sounds like your position is fine, but you're not aggressively accumulating wealth

at this point in your story. When do you kind of like begin to really zero in on the goal of financial independence? So this would have been about nine years ago. When I first found out that I could actually work from home in Hawaii, I wanted to buy a house, which I already knew at the time. The average is about $450,000 is $500-something,000,

for a house. So that's 20% down. That's $80,000 plus closing fees. So you need all of that in cash. We had no other assets because we've been renting. And I know there's a whole argument between renting versus buying, whatever. We wanted to buy a house. So at that point, I was looking around on how to save money and just starting to educate myself more on my personal finances.

So I started at the library and read every book there was on the shelf and personal finance. And then I found Mr. Money Mustache's blog. And for a while, I just read every single article he wrote. What year did you discover that? I'm going to say 2012 or 13. Oh, that's when we discovered him too. Yep, me as well. It was a while.

I didn't realize it was like, oh, community. I just thought it was one sole guy, like, you know, banged away on his computer. for such a long time. I didn't realize like, oh, I should probably read the comments and see who else is doing this. Lots of people are doing it. I'm somewhat slow to the party.

That's okay. So you discovered Mr. Money Mustache and what was your reaction to his idea of being able to retire early? Because my husband's reaction was, this is a bunch of crap. He's got to be selling something. And then discovered that he's like,

well, let me just work out these math problems that he's sharing. Oh, wait, no, that makes sense. that makes sense. That's a reasonable assumption. This is just math. This could work. Basically, that's what I did, too. The concept of saving more than the 15% was revolutionary for me. Why did it not occur to me that I could save more than 15% of my salary? I am above a certain level of income. Why can't I just save the rest? I was spending on a stupid stuff like a massage chair, which was fantastic, by the way. It is fantastic, but you know what's even more fantastic?

Financial Independence. Yes. Also, I'm super ticklish and I can't get massages, so I don't appreciate them in ways that other people can, perhaps. Oh, poor Mindy. I want to get to the part where your coworker died at work three years from his retirement, because that seems like a big impetus to moving back home.

Yeah, that was a huge reason for moving back home. So originally, I was going to do what he was going to do, do and just ready to retire and have all this, you know, cash built up and all of this wealth build up and all this net worth built up. They could buy a home in Hawaii. But then my, my coworker, Eric, such a sweet guy, but he used to talk to me about it all the time because he wanted to move to Hawaii. And he was three years away from retiring. And he got found by the cleaning lady at his desk, flumped over. I don't want to do that. I don't blame you. I would have missed out in all of these decades of being at home. Well, and, you know, weather can play a

little bit of a factor into it, too. Hawaii has slightly better weather than D.C. Unless you like cold and snow and sleet and summer, but spring. Spring is nice for a day and a half. Yeah. Wow. So you decide to move back home. Home is Hawaii. Yeah. From one high cost of living area in D.C. to another high cost of living area in Hawaii. Sort of. In what year is this? Okay, so I took a pit stop in Houston for a year and a half. Oh, okay.

So that'd be 2012, 2012, to 13. So you're discovering Mr. Money Mustache while you're in Houston. It was right before I moved to Houston. Okay, and then you moved to Houston, then you moved to Hawaii after that. Yeah. So my husband and I did not live together for about four years. because he couldn't get a job in 2007, like nobody was hiring. So he went back to his old company in Houston, and he was just staying in like, his company put him up in motels and hotels.

And he's finally like, I need to get an apartment. So basically he got tired of that. So we were paying for two different places. Okay. So that's a high cost of living area plus because you've got the other apartment. So you didn't live with him for a while. You moved back to Texas to be with him? Yes.

And to get cheaper rent, mostly for the cheaper rent. I'm a horrible person. Were there any issues with your move from Texas back to Hawaii? Like, how did that work out? And how did you kind of manage to pull that off? So there's a company called Matson that ships almost everything to Hawaii. And at the time, they provide, you could get a 20-foot container or a 40-foot container. And it was like $900 difference between the two.

and a 40-foot container I could put my car in. So what we did was it got dropped off on a Saturday and it was getting picked up on a Monday and had that much time to get all my junk into it, plus my car. That's what I did. I didn't have a lot of junk because I already moved from Texas, I mean from D.C. to Texas, so I got rid of stuff. And then I just bought used things when I was in Houston

off of Craigslist. And I didn't have a bed. We slept on the floor. I mean, we had a mattress. So we moved all our junk here. That was fine. It's just now that I'm from, In Hawaii, I have to go back to D.C. every month for five days. So it's basically Thursday, Friday through Tuesday, every month, on my own time, on my own time. Because my duty station is still in D.C.

It's not in the city or state I live in for a whole bunch of reasons because it's the federal government. So this is pretty much the thought of, I can't do this for 30 years, especially. after I had my first kid, you try leaving a six-month-old for five days every month when you're still breastfeeding. I mean, Scott, you probably wouldn't do this, but I can't really. It's not easy. No, I can't imagine. I mean, I couldn't. Oh, wow. So every month you have to fly across, that's a big flight. That's like 20 hours. 13 hours. Yeah. Because I don't. Oh, it's only 13.

It's only 13. So I got two free flights a year because round trip flights a year because I was racking up. I would put everything on my credit card for the points. And then I was racking up so many miles that I just basically paid for two of the flights. I also took leave sometimes to not go. Anyway, it wasn't 12 times a year in case people like worry. It was a little less than that. Well, I would hope you'd be able to like bookend them and hit the end of January in the beginning of February.

the once a month is already bookending. So technically I'm supposed to be in my duty station two hours per bi-week. So I'd bookend by weeks. So I'd fly out. I work full day, Thursday from like 5 a.m. till 4 or whatever. And then I would take the red eye, land in D.C. at like 1 o'clock p.m., get on the train, get to the office, because it's only two stops away from Ronald Reagan, and then show up and go to work. For an hour, very grumpily.

I show up in my boss's office. If he's still there, I'd be like, I'm here. That seems like not the best way to get high quality work out of your employees all the time. I mean, not saying that you're slacking off, but, I mean, you're jet lagged. Yeah. It's like seven time zones away, right? Yeah. It was really hard.

And I stayed with friends because I'm too cheap to pay for a hotel. Frugal. We pronounce that frugal here. I'm frugal. Yeah. Because hotels are like $100 a night. And I'm staying four nights, that's $400, plus the plane ticket, which is between $700 and $1,200. So how long did you do this for?

I want to say five years. So since 2014 until last year, so 2019. Yeah, that's five years. Oh, my goodness. So, you know, Hawaii has been part of the United States for a lot longer than 2014. It's been brought to the office's attention. So last year they changed it, and they have a pilot program where 10 examiners can work from home in Hawaii or Alaska. Alaska is also excluded, by the way.

So in Hawaii or Alaska, I know. Alaska is also part of the United States. They just got the memo last year where our duty station is here. So our salary is based off of a national salary, which is unusual for a federal position. Most federal employees have they have like cost of living and they have a locale. We do not. So it doesn't matter where you live, it's the same salary, which luckily is pretty high. Compared to, like, I would not be making as much money as I am if I was an engineer.

Unless I was a computer engineer, but I hate computers. So that's out. Same. So how did this impact your financial story? It seems like, was this commuting something that was kind of a big driver for you to attempt to get to fire earlier? Was it a hindrance because you were spending all this money on travel and lodging for five years? Or how does that kind of relate to your journey to five?

So it's a bit of both. It helped push me towards saving more money, looking for outside investments, doing more research into what things I can invest in to get more streams of income. But it also kind of dragged down my investing because I'm spending, I don't know how many thousands of dollars in probably $6,000, 7,000. just in travel, which at the time I could write off as a tax expense. So you said you wanted to buy a house. Did you end up buying a house in Hawaii?

Yes, I bought a house in Hawaii. You're seeing the results. Oceanfront property, mansion on the beach? If the beach were about 15 miles wide, yes. I actually don't really care for the beach that much. I don't take that look off your face. Don't you live in Hawaii? It's sand. There's sand.

There's sun. You get sunburned. I hate getting sunburned. I mean, I do. I like the ocean. I like the beach, but I don't want to live on it. Are you in Maui then?

No, I am not. I'm on a lot. Oh, okay. I'm trying to get to, so you're working this job at the patent office from Hawaii. You're flying back and forth. How does your net worth, can you give us like a picture of your financial position,

how it's evolving from the period of 2014 after you buy the house and move to Oahu and today, or maybe the time when you stopped commuting regularly in 2019? So it's going up. I mean, it's always been going up. I've still been maxing out my TSP. I max out my Roth IRA.

I max out my husband's Roth IRA. That's all pretty much done out automatically. And the house value has strangely gone up quite a bit, like $250,000 in the last four years. Wow. For some reason, the town I moved into, it's a small town, but now it's really high in really high demand. I'm seeing houses that are being listed and then selling within five days for the same price you can get a house in town for. I don't know why.

These houses are old. Because it's Hawaii. Because it's Hawaii and people love. You can buy a brand new house and like, okay, I don't live in Eva Beach, but in Eva for less. And it's brand new. And it's right next to the beach. That really you can get beachfront property there for less than a million. How do you kind of leverage your story to help those folks repeat your success, basically?

Okay. So the main thing for us was to cut out eating out. We cook at home a lot more and we stick to a food budget because it doesn't help if you're shopping and you just have an unlimited budget and you just buy whatever you want at the grocery store because now you're just replacing dining out costs for grocery costs. just don't spend so much money at the grocery store. Yeah. Well, let me ask you this. So you guys are both earning solid incomes, it sounds like, right? You know, nothing crazy, not like probably like $200,000 each. But, you know, it seems like in a six-figure ballpark each. Is that a, is that our...

Well, not each. My husband makes a lot less than me. So we're less than $200,000 total combined. Okay. So that's helpful. So we're in that picture. You're in a high-cost living area. You have a home that you'll, you'll,

that you love in Oahu. And really, it sounds like the key to your success was just kind of a basic discipline with your spending. Right. On a variable basis. It almost always comes down to just consistently applying the basics. So you're not buying impulse items all the time. You're keeping track of what your spending is like.

It doesn't have to be specific. It can be kind of general. So, for example, I check my credit card every week. And almost all my spending goes on my credit card. So I know how much I spent last week. I know if I spent too much and I need a cut back. Because I'm not going to remember. Everyone keeps thinking, oh, yeah, I'll remember.

No, you won't. You have all this other stuff. You have to remember. You're going to forget that you bought a $200 dinner last week. That is a very good point. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening.

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like packing a spare stick. I like to be prepared. That's why I remember, 988, Canada's suicide crisis helpline. It's good to know, just in case. Anyone can call or text for free confidential support from a train responder anytime. 988 suicide crisis helpline is funded by the government in Canada. Do you have a, like, did you have like a timeline when you started this out about how much you thought you could save on an annualized basis and how long it would take you to get to your wealth goal? Yes, I did.

At the time, when I started this, it was 10 years. I've slowed down a little bit. But our goal was to pay off our mortgage in 10 years and then save up, like, whatever we're paying for the extra mortgage, put that into the low-cost index funds. And that would bulk up our savings for the 4% rule. Okay. So it sounds like you were applying all of your excess wealth to mortgage repayment and index on investing, which is great. Did you have any, you know, what was your kind of thoughts behind paying down the mortgage rather than investing? So at the time, I was figuring this is a free way to get discounted points. So we actually got a mortgage with a higher percentage rate because I didn't want to pay for the discount points up front. We're trying to preserve cash because we were buying an older house that needed a lot of work. You need a new roof, new ceiling, your kitchen, new bathroom, new electric, almost everything new. So I needed preserve cash. So I took the higher rate going, I'm getting a loan that I know there's no prepayment penalty.

So there's no penalty if I prepay it or pay it off early. I'll just start paying more money and just increase how much I pay as I get more comfortable with that being taken out of my budget. Because at the time, I test drove my budget before I moved on the difference between my mortgage, which I think was $2,100 and what I was paying in rent was, I think it was $1,700. So the $300, $400, $400 extra I would take and put into my savings account, which went in towards my house fund. So anything above that, I would have to get comfortable with spending extra to pay it down. So did you begin paying down your mortgage basically immediately with the majority

of your excess capital? No, I waited, I believe, a year and a half before I started paying it down, I needed to rebuild and bulk up my emergency fund to a level I was comfortable at. So that's where the access funds went first. And then I started, you know, started, I started, you know, I would start off a little bit at a time for me, $500 a month was somewhere I was comfortable with. And I started paying that. So I tried it for maybe two or three months. And once I was comfortable with that, I started bumping it up more and more until I ended up paying double what the pity was, the principal interest, taxes, and insurance total was to pay down the principal. Well, did you pay it off? Were you able to, how far did you get in terms of paid off your mortgage?

So I have paid off $120,000. Oh, wow. since I started a mortgage about five years ago, I've stopped paying so much extra. So last year, I re-amortized my loan, which if you listeners don't know what that is, it's where they take whatever your principal is and they re-amortize the value over the rest of your loan. So normally, if you're paying down at an accelerated schedule,

your actual mandatory cost will go down. So my goal at that point was getting, my living costs as low as possible for what was mandatory. So I'm still paying extra. I'm still paying the original amount, but now the extra is going towards the principal. And if I want to kick in more, I can. But right now, we're saving money because like I said, my husband's been laid off for six or seven months. So it's better to have this flexibility in case something happens with my job, that we can get our emergency funds to last a lot longer. You mentioned that you didn't start paying down your mortgage for a year and a half because you're building up an emergency fund.

And it sounds like with respect to COVID, you've also, or, you know, the recent economic events and your husband's being laid off, that you're again focused on your monthly burn rate and how that matches relative to your emergency fund. How do you think about your emergency fund relative to your monthly annual spending? So for me, it's how many months that will take us if nobody had any income coming in. How many months are you comfortable with? I don't know, because right now, this is at like 63 months or something.

Oh, my gosh. Oh, wait, you have 63 months of expenses? No, no, no, no. Yeah, I've saved up. In my defense, we're saving for another house. Well, no, that's fine. That's still, you know, you just don't buy the other house if you both lose your job.

That's like no big deal. Right. I spot another house. That was a flip comment. It's no big deal to change your plans if you both. We actually did change our plans. So I was looking at a house that had a bigger yard because my husband wants a bigger yard. Not that our yard's that small.

It's 7,500 square feet. So it's actually humongous for Hawaii. You can get a house with only, I think, the minimum is 2,500 square feet for the lot, not for the house. So he wants a bigger yard. and I want to live where we are because it's cooler up here, so I don't have to pay for air conditioning. That's a nice little town.

So we're going to buy a house. It was more expensive, and we try to negotiate with them because I actually knew who I used to own the house and I saw how much they sold it for. It was for a flipper. I was like, I'm not going to pay you $300,000 extra, and you didn't fix this, this, this, and this.

And I can tell that there's these quality issues. There's also, you know, there's all these things wrong. And they're just like, well, if you can't match the asking price, then go away. So I said, okay, bye. Yeah, I like to keep an eye on those houses because sometimes they snap up right away and then it wasn't meant to be. And sometimes they sit there for a while and you can have a more reasonable offer made. So you're currently looking for another house or have you stopped that plan? I'm still looking.

I'm sending out mailings to houses I know they're empty to the owner saying, hey, if you want to sell to me, contact me first before you contact somebody else. You know, I'm pre-approved. I'm serious. I'm not an investor. I'm not going to tear down your house unless it needs to be. Like, I'm not trying to make money off of you. I just want a nice house that I can live in.

We live in the neighborhood. That sort of thing. Reading Anson Young's, how to find great. Finding and funding great deals. Yeah. That was a really good guide for this. And it's hard, though,

because you're not used to, you're used to just sitting there waiting for something to pop up on the MLS. And now I have to like go talk to people and send out letters. And like it's pretty risky when you're not used to doing it. Oh, it's not that risky because all you're risking is a stamp. Hey, I would like to buy your house. If you're thinking about selling, please reach out to me and let's talk.

It's not any risk to them if they were thinking about selling to reach out and talk to you because they could say, hey, we want $4 million. And you could be like, oh, I thought it was going to be. 400,000, never mind, good luck with your sale. It's a five second phone call. Let me just go back in time for one second here because I want to get grasp on your formula for approaching FI here. And you said in 2014, you bought your house, you then did not prepay it and we're not investing aggressively because you were building up a emergency fund, right? How many months did you build up at that time? Because it sounds like the 63 months you have

today is not really an emergency fund. It's more of a down payment. It's an investing fund, right? But I'm trying to get, what I'm trying to get at is, how much do you think is right for you in terms of your emergency fund relative to your monthly spending? And then were you investing in stocks, your TSP, those types of things prior to then prepaying your mortgage debt? So, yes, I was investing in stock. Sorry, I'm doing the math. So my emergency fund was seven and a half months. And that includes my mortgage and then a healthy but pared down spending. Great. And then were you in you continuing to invest in your TSP? Were you also doing any after-tax investing? Yes. So I was doing both. My after-tax investing is sporadic. It's just

whenever I remember to do it, I should put it on automatic. I don't know why. After all these years, I haven't done it automatically. But the TSP is automatic. It's just to get taken out. I just set it every year for the new value. I just divided by 26 pay periods and it does not medically. Roth IRA, I do it after I do taxes to make sure we're not exceeding the ceiling limit for income because we get bonuses and my husband get to overtime sometimes. So that I have to wait until after I find out what our total income is. So it sounds like that's a good problem there. That's a very good problem to have.

And then what I'm trying to understand now is, okay, so you're saving up 63 months of emergency fund, but most of that's for house reserve. Are you going to keep your current house when you move and keep it as a rental, or do you think you're going to sell it? I'm still deciding. So originally a plan was to keep this house as a rental at a cash flow without considering expenses at a very conservative $2,100 a month. It'll cash flow $600 a month.

But I'm seeing that rent is for houses, especially in this neighborhood, are going up. going for $2,700, $2,800 a month. But I have a friend that wants to, I probably shouldn't rent it a friend. She's very nice. She takes her up her place that wants to rent it. The problem is, is if somebody answers my letter, and I don't have a lot of people on the list, I only have 83, because there's a specific neighborhood I want to live in, because I found out locations very important.

I live next to high school right now, so yay. I hear every football game. So COVID's been great in that aspect because there's no football games. But I want to live in a very specific neighborhood. It's only probably a quarter mile radius. So I have a lot of work. And these are bigger lots. Some of them are newer houses than what I have.

So the price might go for much higher than what I can afford, what I'm comfortable with affording. So if that comes to the case where it's a certain house that I have my eye on, I will sell this house. and take the extra to pay down the payment. It's probably the worst idea ever. No, I think it's great. I think you have a good kind of grasp on the situation and what you're going to do. And you've created several good options for yourself here, thanks to great planning and great disciplined finances over the course of the last five years. So I think-

It helps too. I'm not set in a specific path. So if we look at your position today, how long do you think it will take you it get to having the Forever Home set up and really moving towards your goal of Fy. Like, can I have a timeline or an idea of a ballpark, how long it will take you to get there? If I stay here and I pay off my house and the timeline I wanted to, which I've stopped paying the extra right now just because of the whole everything, if I stuck with the timeline and started redoing it, I have about eight years-ish. But if I buy another house, it depends on how much the house is my target.

is probably $150,000 more than this house with South War. And I know really it's not encouraged to upgrade your house. You should stay where you are. But to get in the neighborhood that I want to be in for forever home, that's basically what I'm having to look at is an increase in price. Okay. So you've got you're going to upgrade a little bit and that's going to punch your timeline probably by like a year or two, it sounds like.

Right. So now I'm looking at other ways of generating extra income, so other income streams that is not necessarily investment because investment, it's a long term game. As you both know, it makes a while to get anything. So investing in stocks is going to take a while to get any of the 4% returns to be significant. Yep. If you want to build wealth and move towards this, you can either, spend less, earn more, invest aggressively, or create assets. And it sounds like you and your husband

feel moderately optimized right now on the income front. You know, that can change depending on what sounds like your husband having some variability to his income over time. But yours seems very steady. Is that right? Yes. So mine is pretty steady, except I'm a federal employee. So if the government shuts down, my agency has a trailing probably about a month and a half budget. They can still operate because my agency brings in their own money. So we're like the postal service. The fees that you pay to get a patent, pay my salary. We don't rely

on taxpayer money. That being said, have you ever tried to buy a house in the middle of a government shutdown? Not as a government employee. That was fun, by the way. The bank was like, we're not going to give you a loan because we don't think you have a job. Because the government shut down.

It's like a 45-day government shutdown and I bought this house. Jeez. I know. And I got a really good price on this house because I negotiated. Yep. Well, so it sounds like you got this income optimization in general from your full-time job right now. You've got a disciplined approach to your day-to-day spending with the caveat that you have, you have a very specific lifestyle goal for your next house, which you're willing to acknowledge may delay your timeline, but that's what you want and you're not apologizing for you're going to do it. And you love it. I'm apologizing for it all the time, but I'm still going to do it.

I just moved into this place that I'm renting a nicer place now after seven years of house hacking. So I'm completely on board with you. I am looking for house hacking options, by the way. Thank you for your book. It was amazing to read. No, thank you for the plug there. And then your investing approach seems like it's generally basically stocks with potentially a real estate play depending on how the housing situation works out.

I actually already have real estate investments. It's not a lot. It's only 5% of my portfolio, but I'm an LP on a multifamily in Texas, and I'm looking to invest more as an LP. They have another, the same guys are running, have another deal that looks pretty juicy. And again, it's not a huge percentage of my, of my net worth. Not yet. I have a similar, yeah, a similar approach with about 5% of my net worth and syndications and those types of things. The title, limited partner, is the job title that we should all aspire to one day in the fire community. I sort of skipped the whole, you know, get a condo, rent that out, get another condo rent that out,

house hack, the move and use that duplex. Like, I skipped all that. I'm probably the worst real estate investor to ask about anything. I'm just like, oh, I just let my guys find something. I think that's very common for folks in this kind of like upper middle income, you know, high cost of living environment because it's just so hard to get that cash flow. And in order to buy those properties, you have to plop down 80 to 100 grand per property in order just to enter the game.

So it's not surprising that that's the case because it's just like a little harder to access, I think, for you in Hawaii than it would be for somebody else. I've been looking for a cash flowing property in home. for probably two and a half years, but I also have a very conservative 40% expense that I'm applying when I look at property. I've kind of stopped doing that because I'm more on getting us a house with a bigger yard.

I don't care if the house is falling down. As long as I can get a VA loan, I'm cool. Are you a veteran? Which, by the way, VA no longer has that. My husband used to be in the military. Oh, okay. Yeah, I didn't mention that. I was going to say, wait, we missed that whole part of your story.

Yeah. Not me, not me. No, I'm married into it. I'm a VA gold digger. So we haven't even touched that. So it's a pristine VA, but the VA loan doesn't have a cap anymore. If you want to hear more about that. This is a new thing.

It's very new. Unfortunately, I had a beautiful house, but the VA had a limit, and they didn't have the VA rehab loan available, and that thing had no kitchen. Oh. Yeah, and it had knob and tube electric. So we could not offer what our highest and best would have been because I would need to get a conventional loan or a land loan at the time, which means you have to put at least 20% down. Well, if you're offering $600,000, that's $120,000. We didn't have that much cash sitting around.

And we didn't want to get a home equity line of credit on the current house. Which ties into our other, if we keep the house and we end up renting it out, I will get it. a helock on this place because Hawaii has this really good rate right now. It's two and a half percent fixed for one year. And it goes up progressively if you get a higher, a fixed amount for a helock. No fees. Wait, that's just for Hawaii? Yeah, it has to be Hawaii property. Of course. Sorry. I had a friend that looked it up and he's like, what? I want to go through this bank. It's a local, it's a couple of local banks are competing with each other for the helocks. Okay. So they're having, they're having lower.

lower fixed rates. And then after that, it goes up and down, which is amazing. But anyway, so that goes back to my original strategy of keeping the house, renting it out, and then using the Helock as seed money for more investments. But if I saw the place, maybe I will just take what I need for the down payment to get the minimum and then use the rest of the equity to invest in passive income. I have options. It's nice. It's nice to have options. Okay, so you have talked a couple of times about passive income. What passive income strategies do you have in place right now outside of the, well, the, so the limited partnership that you were part of, does that generate income right now? Or does that? Yes. Oh. So we closed. So the partnership closed in March of this

year. Closed meaning you bought the property? They bought the property. Okay. Okay. In the middle of a pandemic. Yes, it's awesome. And so that's generating. income, please don't ask me how much, because I do not know. I have not set up my ACH transfer yet. So it could be like a dollar. I don't know. You need to set up that ACH transfer so you can start getting that sweet, sweet cash flow of a dollar. More or more. Their projection actually wasn't to generate any type of cash flow except for their category A investors for the first year. So originally they were timelining stabilization for the first 12 months. So no income generation until month 13. They've beaten that by several months. Well, that's fantastic. Yeah, so, so just,

just to kind of, if you're listening here and you're wondering what, you know, Kathleen's talking about with this category A stuff, you know, when you invest in a limited partnership in a real estate investment, often, but not always, there are two classes of equity, right? There's a class A, which is almost like a, almost like debt, right? You get a preferred return, maybe six, eight, 10 percent, depending on who the sponsor is. And you get that interest payment back, right away. And then you get you get paid your equity back. So if you invest $100,000 at 8% preff, you'll get $8,000 in interest payments over the course of the year. And then when the asset sells or refinances or however they intend to pay back investors, you'll get back your

$100,000 first. Then you might have another common equity component where they're not getting an 8% return, but you have the chance to get much higher than an 8% return, right, as a common equity holder. So you might see a huge loss. You get to share what they sell it for. Yeah, you might see a huge loss in the first year because the asset is depreciating and whatever is going on. But then when they sell it three, five years later, it might, you know, they might have increased its value. You might get it 18 to 20 percent, you know, IRA. That's the hope that we all go into these investments with, you know, who remains to be seen. And yeah. If not, just stash it in an index fund. Yeah. So it's not a very good passive income strategy.

to invest in it, you know, if you need the money right away, right? And that particular second type of thing. But you can get that passive income by going with the Class A or whatever they call the different types of equity and preferred equity or common equity in those types of things. So it sounds like, yeah, it sounds like you've invested in common equity in a syndication. And so you're probably going to see very little in the way of returns this year or next year. And then you ideally will see the, yeah. So it's great. I need the money, but I don't need the money right now.

Yes, it's probably a much better approach for you if you're trying to build wealth over the next three to five years rather than generate stable passive cash flow right now. Correct. So my ability to invest in equities is quite limited. So right now, all of my equities is basically in index funds, the low-cost index funds. Vanguard is great for that. I think Charles Schwab is also great. So the federal government has a, this weird thing where if you're a certain position, like my position, where I have influence over the financial prospects of a company because I can grant or deny a patent, I can only invest up to $5,000 in a single company, which I mean is great because you don't want to be messing around with buying and selling a lot. So anything I do that's just for me to have fun with is it's up to $5,000 per company. So I think I've only have about $5,000 total. invest in individual companies. And that's just to, because, you know, I like researching.

And I wanted to see how my research turns out. And it's always a two to three year timeline for me. But everything else is majority in either low-cost managed funds or majority is in index funds. But even then, I'm not drawing down that because I have a job. I don't need to draw down that. Nice. That makes perfect sense. So I think you've got a really well-developed philosophy here around passive long-term investing in these asset classes. You have a little bit of play money to invest in the fun stuff like limited partnerships and in stocks your selection. You've got a solid emergency reserve and interesting options with respect to real estate in your home. Yeah, it's a good goal to get to. I spent most of my childhood listening to my parents or my

mom talk at my dad about all these investments. They used to be in investment clubs. But one of the most memorable things is there was a market. I don't remember when because I was just a kid, but my mom was just moaning and complaining about her index funds and stuff going down. This is something she's not tapping for probably 20 more years. I mean, my dad retired two years ago. So this is not funds they needed at all. But she was just so upset that this went down.

And I think that really colored my approach to investing for the longest time, where I didn't want to risk money. I had a lot of stuff in bonds. I still do. I'm terrible. I had most of my stuff for my TSP in the G fund, which is the government bond fund. Oh. Yeah. Yeah, during 2000. But it was good during 2007. Sure. But I didn't start investing that into the index funds, which is the C fund, S fund, and I fund. That's the whatever. You guys can look it up if you want to know until much later. But before I moved to Hawaii. So while you were shielded in 2007 and 2008, you kind of missed out on some of the big growth in 2012 and 13, which is, you know what? You can't go back and change that.

So it is what it is. No, but at least I didn't lose money. I mean, I shouldn't say that because I don't want people to be like, oh, I shouldn't put any money because Kathleen said it. At the time, I was comfortable with what I was investing in. I wasn't fearful and I wasn't worried about it. So I kept investing. That's all you can do is at the time, be comfortable with what you're investing in. And then as you learn, as you educate yourself more about the different opportunities,

then you can start to change your investing approach. And we had Michael Kitsis on the show, and we asked him about the – it was an unrelated question, but it kind of is related. He's like, you can't time the market. put the money in when you put the money in. It would be great to be able to get in my time machine and go back to 2007 and pull all of my money out right before the stock market crashed. And then put it back in right when it's all the way down.

Put it all back in right when it started going up again. And when you invent that time machine, stop by my house and pick me up so I can do that. But until then, you just keep putting your money in at the intervals that you choose to put your money in and you make smart decisions on the investments that. that you're doing, and that smart decision comes from educating yourself. And if you don't want to take the time to educate yourself on individual companies, throw it in the index fund. If you don't feel comfortable putting it into individual companies, put it in the index fund.

I know so many people in this space who are not saying, oh, here's a hot stock tip. Here's a hot stock tip. Index funds. Yes, I was going to say that. You took my joke. Sorry. Here's a hot stock tip. Invested index.

Well, I mean, look at this year. Look at 2020, right? We just saw an enormous crash and everyone was freaking out in March and April. Except for the Thai community. Yeah, and it's gone right back up within a year. Now, who knows what's going to happen next? But it's like, look, if you panicked and sold, you missed out and all of that, right? And it's just, it's absurd what's going on in the markets here.

But all you can do, I think, is invest for the very, very long term. and not try to time the market like we just described. I love index funds personally. And you just apply that strategy over the very long run. The next time it was a crash, it could take six years for 10 years for it to come out, to go from bottoming out to a new peak. This time it took six months. But it's just impossible to figure that out.

And again, I just think that your philosophy needs to call for not timing the market and attempting to manage these ups and downs. Right, which is something you've been, everybody you've ever had, has almost everybody you've ever had. I think you had one guess that had like a list of 50 income investing streams. And one of them was like buying horses or something. Oh, that was Chris just a couple of weeks ago. Yeah, that was 75 alternate investments. And there's still, you know, there might be something on there that could be very interesting and your specific skills could make that a very lucrative investment for. for you. You're an engineer. You have patent information. Yeah, I can't. I can't experience. I miss. I can't do anything. You can't do anything specific, but you can understand what a patent means and, um, right. So when I quit this job, well, now if they already have a patent, could you invest in them? Or is it still $5,000? No, it's still $5,000. Any company. So because I have

influence. I think it's any company I examine, but I have to recommend. But I have to accuse myself? I don't know. I should pay attention more to the ethics training. Yeah. It's very dry. Oh, wow. Yours is dry. Mine is super exciting all the time. It's just like, wow, what an amazing concept. No. Oh, don't tell people. Oh, you have a nice bud. That's not ethics. That's sexual harassment. Sexual harassment. Sorry. Don't lie about things. I'm so lost right now. Wait, Scott, are you saying you don't have ethics? You never had to take ethics. You never had to take ethics training before? Oh, as a real estate agent, you have to take, oh, as a member of NAR, you have to take the

special ethics course. It was awesome, thrilling from start to finish. Start to finish. I'm sure it was. Paid 100% attention. But no, there are things that you can use your own special skills and experience and information and, you know, even just passion projects to invest in different ways. But again, that's not the bulk of your investment.

the bulk of your investment should not be horses, especially if that's not your thing. I mean, if that's your thing, maybe horses is... That's a specialty? Yes, it should be. But then again, that's not an alternate investment for you. That's your main one. You already know all about it. Right. Right. So actually,

I have... I'm trying to get a second stream of income. I'm working on it right now. Where I took a very good course, excuse me on how to research Etsy niches to sell printables. And it's very, very detailed. It should be for the price I paid for it. But I loved it. I am not artistic.

I'm an engineer. So, yeah. But I found something that aligns with my skills, aligns with something that I like to do. And there's other shops that are selling similar niche type items that are making a very good income. Huge, huge money. Yeah.

And principals are like the best thing, because you don't have to have any inventory, you just do it once, and just because you're not creative, you're not artistic, doesn't mean you can't hire somebody to create the art for you, and then you're selling it.

You just have to make sure that they know that you're selling it. Right, and you have to make sure you get something that will actually suck. Yes, well, you know, there's that minor detail. It's still a business. So I've been doing that for the last couple of months, and I'm working on getting everything finalized. this niche that I picked has it's got instructions. I had to film. I'm learning how to do Premiere

Pro now. Wonderful. But that's again, that's awesome. Once you do it once, then you can just sell that over and over again. Yeah. So at this point, my goal when I was researching was at least $5,000 a month in income. And since that's the only takes, you probably have only 10% expenses. 90% is profit. And then I have to pay taxes. Yes, please pay taxes. Yes, I would definitely pay tax. Etsy sends you a little thing if you make over certain amounts. When you file taxes, you have a, I think, I don't remember what the forum's called. But so that's another stream of income I'm looking into. I can't remember his first name, but it was something Alan. He has a book called Multiple Streams of Income. And he talks about a really similar thing, what Scott's book,

which if you haven't read it yet, it's called what Scott? Thank you for the plug. Yes. Set for Life, yeah. I had a brain fart. So it's set for life. It's a very similar idea. You know, you can house hack and get roommates. And then you can start looking at doing passive income streams of things. So having a second job or having a side hustle. And when I read this, I read this before, set for life because set for life didn't come out until after the other book was available at the library. And I'm like, wait what? I don't need just one? Job? Like, I can have other income coming in. And he had a whole host of very doable incomes. Like, you know, you invest in dividend paying stocks or invest in a dividend focused index fund or mutual fund. And that percentage is considered income. You can have a side hustle. You can do stuff that's passive. Like, if you have an electoral property, which I can't do. But Scott has done. He wrote a book. He's getting royalties from the copyright off of that book.

Yeah, multiple streams of income doesn't mean you have a second job. It could be a second job, but it doesn't have to be a second job. It can be all of these little side hustles, all of these, like, there's a lot of things out there. It's one and done. I mean, Scott, in a very high level overview, Scott wrote a book, one and done. And that book keeps generating income for him. Now, it's not just one and done.

Hey, I sat down. And in five minutes, I typed out a whole book. It took, you know, 10 or 15 minutes. for Scott to write that. But then once he's done with it, it just keeps generating income. That's the kind of multiple streams of income that make financial independence so doable, so obtainable. Right. And a good framework for attacking something like that is to think, what is within my, you know, if you're an investment banker working 90 hour weeks, then doing a second, creating a second stream of income is going to be very challenging for you.

But ideally, you have a large amount of income generation potential from your, day job, right, to offset that. You know, Kathleen, I'd imagine with your job that you're working closer to the 40 hour a week level rather than the 60 hour a week plus. Is that, is that fair? Yes. So I work probably about 50 hours a week just because of the production schedule where I don't have enough stuff done. I have no control over if something's difficult or easy to find or if I can find it. It's hard to prove a negative. But I've been actually reading Tim Ferriss is a four-hour work week the last two weeks. And I'm an industrial engineer,

and I don't know why I didn't think to do this for my job, do time blocking, and then try to decrease how much I'm allowed to spend on something. So I've been starting to try to apply some of his concepts to working. So, you know, have a much shorter time frame, like, oh, I need to get this written up. I'm going to give myself half an hour. All right.

So, Kathleen, you know, I feel like this was a great little last bit to our discussion here, where, you know, look, again, we have those four ways to build your wealth, right? Spending less, earning more investing or creating assets. And it sounds to me like what you're doing is you've got a great income. You're very cost conscious on your variable spending. You've got a great investment philosophy. And you're basically spending chunks of your free time as efficiently as possible, reading and learning and figuring out ways to at least experiment with generating new income streams

on the side in addition to your job. So I think that's a very powerful approach. And you might find if you apply that, that you get to your goal much sooner than eight years from now, certainly much sooner than 10, if you can hit one winner over the next couple of years with some of these side projects and passive income ideas. That would actually pay for another house. There you go. Well, I love it. Well, is there anything else that you'd like to cover before we move on to the famous four here?

Let's talk about how people can save money by not eating out because that's like, a big platform for my my block. That's what I'm known for by 10 people. Someone living in a high-cost living area with solid income, like how much do you think they could save by being more disciplined with their eating habits? And what would you recommend as a good approach for that? So I spent $20,000 in two years just eating out when I was in college. Oh my God. Yeah, in two years. I was in college. And I was in Wisconsin, so I was cheap. Let's say you spend, there's two of you, you spend $20 a meal per person just for dinner. Say you're fupil and you save leftovers for lunch the next day.

You eat out seven times a week a week, which I hope nobody actually does. I bought a house from somebody once and in their refrigerator, you know, you're looking through the house. You look through the refrigerator too. It was all takeout menu, all leftovers. And it was like, I don't think she cooks at all ever. Or he, I'm being sexist. I'm totally being sexist, but I really did not believe that either of them cooked ever in the house. And it was just shocking to me.

And if that's you and you feel judged, I'm sorry, I'm not trying to be judgy. But oh my goodness, that was just like, it was such a departure from my life that I was shocked. Yeah, I grew up, my mom cooked all the time. We never went out. We had a garden. We had a huge garden. And we grew a lot of our food. We lived in California so we could.

We don't have a huge garden, but we still have a garden in my parents' house. So say it's $20 a meal, you know, everything included. You can spend way more than this, by the way. Two of you, every day of the week, 52 weeks of the year, it's $14,560 you're spending on eating out at $20 a meal. That'll fund both of your Roth IRAs. Yeah. So, I mean, say they decided to cut down, eating out and start eating in, meaning they cook their own meals in half. They only do it, say, three times a week.

That's $7,280 of spending. So it's kind of a big money. And this is if you're buying a $20 meal. So how do you change that? Good question. Well, you have to learn how to cook. I'm sorry. That's pretty much the only way.

It's very simple, though. You have to start with the basics. So you can start cooking by making salads. That's all like the pretty much the lowest cooking thing. You throw together vegetables and get salad dressing and put it over on top. Then you start building. You start understanding like what vegetables go together, what don't, what you like to taste. You can use starbought dressing.

That's okay. And then you move up to something, a little. little more complicated, like making soup. So you have to learn how to cut up vegetables in a regular size. You need to learn about salting your food. A really good resource to learn about that is salt acid, fat, heat. By some enoushtrat. She describes how to learn how to salt your food in the book.

Once you can understand the salt and the seasoning, then you can start looking at recipes or watching Food Network, not those stupid competition ones, but the actual ones where they sit down and cook. So PBS is a good resource because on Saturdays, I don't know about your PBS, but we have like a whole block of cooking shows. And they show you how certain things are made and you just need to learn the basics. Yeah, I like to follow a recipe exactly the first time. And then, oh, I didn't like this or that was too much or I would like to have more of that. And when I make a brand new recipe, I always follow it exact for the first time.

But then if I liked it in the beginning, I mindi it up. Yeah. It's called improvising. Yeah. You know, when I was first getting started on my journey to fie, I would eat an onion. I would take a large Costco onion. I would saute it and caramelize it along with mushrooms, spinach. And then I would have either steak, chicken, salmon, or pork chops, and then a vegetable.

And I'd have that every single night. I would make that with leftovers. You know what? My husband's got you beat. I was single for a while, surprisingly, as well. Unsurprisingly. My husband used to, when he was in Texas, but when I moved here, he didn't move with me for the first year and a half. And I would be like, what are you eating for dinner?

He goes, I'm eating a food salad. Oh, what's in the fruit salad? He's like, cantaloupe. What else is in the salad? He's like, cantaloupe. It was on sale for 99 cents. So what are you? having for lunch tomorrow.

A fruit salad. He's eating another half of the cantaloupe. That's not fruit salad. I told her. I just cut the cantalop in half and it was like eating out of the bowl. Hey, it works. I used to just have broccoli for dinner. But I did that because I like broccoli. I like broccoli too. I would also like to point out that in our Facebook group,

Katie said a shout out to Scott Trench's former roommate for putting up with him just eating an onion for dinner every night. It wasn't just an onion, though. He said he would saute it with stuff and have it with, and caramelize it and then have it with a vegetable and some type of protein. Not always. Sometimes it was just the onion, right?

It wasn't raw, though, was it? No, it cooked it. Carmelized onion. I would be caramelized, but yeah, occasionally it would be sometimes just the onion, but that would only be if I ran out of other vegetables. You can make onion soup. That's what it was. So meal planning is important.

Okay, that's the last thing I need to say. Meal planning is important. So look at what's on sale and then plan your meals, what you can make out of that and what you have in your pantry. So you're not spending something that's on regular price

because on sale you could easily save 50% or more off of what. So, you know, say you want a steak. A T-bone steak is $14 a pound, but on sale it's $899 a pound. open cup, it's still expensive. But it's still, it's like almost half the price. To stock up, if you like tea bone steak, stock it up when it's 899 pound,

and then plan to have a tea bone steak with vegetables and whatnot that are also on sale for your dinner. I generally just write a list out of what I can make of what I have after a grocery shop. So I don't have to think, oh, what I'm going to make for dinner today. And then you don't run into the whole running out of vegetables and I have to only eat an onion problem. Great advice. That's great advice. With that, let's transition to the famous four.

Kathleen, are you ready? These are the same four questions we ask of all of our guests. Yes. What is your favorite finance book? Hands down to Simple Path to Wealth by J.L. Collins. Oh, no one's ever mentioned that before. But right now, I'm actually listening to Raising Your Money's Savvy Family by Doug Nordman and Carol Pittman.

I can't get the actual book from the library because Doug just dropped it off at the local library. I live like the next town over to him, but everything's closed. So the only thing they had available electronically was the audio book. So I'm listening to that right now. And I'm actually really liking it. And I think even if you don't have kids, listening or reading that gives you a good basis for training yourself on how to manage your money. It is an excellent book. We had Doug and Carol on a few weeks ago.

and just the concepts in there actually change the way that I'm teaching my kids about money too. It's really good concepts. I mean, even if you don't have kids, you can do it to yourself. You're like, oh, you get a dollar to spend on your one special thing

when you grocery shopping off your list. Yes. Which will only cover gum now, I think. What would you say was your biggest money mistake? It wasn't learning about investing. Early on, I was afraid of losing money. So I put everything in, like I said, in the G fund.

And I didn't bother reading about index funds. I'm like, it'll just take care of itself. So had I educated myself, I would have been much more comfortable with having more money in index funds. Nope, makes sense. I love the opportunity cost mistake. Yeah, that's a good mistake to have instead of student debt or credit card consumer debt. Loaning your boyfriend, $500.

I'm assuming he not. Oh, no, you can let your boyfriend money and have him pay you back. That's not a mistake at all. It's a big I'll pay you back. It's been a few years. What is your best piece of advice for people who are just starting out? So get education. Learn how to learn.

You go to the library, just start reading every single finance book you can. Don't stop at just one because sometimes you'll get a skewed opinion. So a lot of people say start reading rich dad or debt. But the problem with that is, He has a skewed opinion on things. And you're not going to realize some of the nuggets that are really good advice. There's also a lot of online resources you can go to. If you have what, six kids?

You live in a high cost of living area. Wendy Mays at House of Fye. She's got six kids. They're on a single teacher salary. So if that's your situation, go to her. See what she's doing. She lays out her budget. She talks about things that she did to decrease, I think it was like six digits of

debt in a couple of years. They're amazing. There's a whole bunch of things you can start listening to this podcast, which I'm assuming if you're listening to this episode, you already do. Join Facebook group. So bigger pocket money has a Facebook group, which I'm a part of.

There's a whole slew of blogs that you can read that have different perspectives. Like Anna's from Goat Dog Simple has two older kids. So I think a little closer to your kid's ages, like sort of almost teenagers. Yeah, we're actually in teenage years. Oh, they're great. Super awesome.

I recommend them to everybody. At home. Yeah. All the time right now. Well, what is your favorite joke to tell at parties? It's a long one. Is that okay? Go for it.

And it is not a pun. Okay. So there's these three guys or gals running from the police. They run into an alley and they're having to hide just they can't go anywhere. So the first one hides in a trash can. the second guy hides in the tree. The third guy hides in a potato sack. So the cops come up to the first guy in the trash can,

and they hear a noise, and they shine the flashlight and be like, what's that? So the first guy goes, meow, and they go, oh, it must be a cat. So they move on, and they get by the tree with the second guy in the tree. And they hear a noise and say, what's that? And they shine it up in the tree. And the second guy goes, cacao, oh, it must be a bird. So they move on to the third guy in the potato sack. And they hear a noise.

They shine to flash light on the potato sack and say, what's that? The third guy goes, potato. I love it. That is a funny one. That's awesome. That's not even my joke. It's my friend Garrett's joke. Did he get caught?

I don't. Okay, Kathleen, where can people find out more about you? So they can find me at cooking upfire.com, or they can find me in the bigger Puckets. Money group, the Facebook group, I should specify, under Kathleen Hutch. Ooh, okay. I know that. I know Kathleen Hutch. I didn't know that was you.

That was me. I had a post band, sorry. Oh, that's okay. I didn't want to type out a whole thing about why you should have a car, always have a car payment. So I just attached my link. So, yes, we are rather strict about no promotions. Sorry. But we didn't kick you out.

we give you a chance. I'm sorry. I just didn't want to type out the whole thing about why you should always have a car payment because someone's asking about how to save up for a car. And I was trying to do it on my phone. I'm sorry. That's okay. That's okay.

Kathleen, this has been fantastic. Thank you so much for your time today. I know that we record early in the mornings where we are, and it's even way earlier where you are because you're in Hawaii. We should have just gone out there and recorded at her house, Scott. There's a two-week. There's a two-week quarantine right now. I know, which is, I totally understand it.

You're going to have to stay here for two weeks. Yeah, shucks. And then once you get there, if you have to stay there for two weeks, you might as well start your vacation after that. That's right. Okay. The show notes for today's episode can be found at biggerpockets.com slash money show 147.

Kathleen, thanks again for your time today. We really appreciate it. And we'll talk to you soon. Okay. You're welcome. Thank you. Okay, Scott, that was Kathleen Hutchins. What did you think? I was really impressed by her discipline with her spending over the course of her journey with money, basically.

She's always been, well, after college and grad school, she's been very disciplined with her budget and spending. And that's really set herself, set her up with some really good life options today. You know, Scott, you're right. After she got over the hump of spending on frivolous things, she really got herself dialed in and is focused on her goal, which is to become financially independent on her terms. She talked about buying another house that is more expensive than the one that she lives in now. And that's okay to do. That's a choice that she's making. She lives in Hawaii. She lives where people want to retire to. If she wants to buy a slightly more expensive house now, it's in her budget. She has the ability to do that. I think that's great. So,

pursuing FI, her version of FI is what she's doing, and that's absolutely valid. What do I say every single episode, personal finance is personal. And that's her personal choice. And I think that's great. Absolutely. Scott, should we get out of here? Let's do it. Okay.

From episode 147 of the Bigger Pockets Money podcast, he is Scott Trench. I am Mindy Jensen, and we can't stay. So later, Stingray. Well, thank you to James Isaac Smith for that outro. Thank you, James. Thank you, James. Okay. The end.

Goodbye.