BiggerPockets Money Podcast - 162: Finance Friday: High Salary - But Nothing to Show For It. Cutting Unnecessary Expenses with Engineer Tracy

Episode Date: January 15, 2021

As you go further along in your career, you should (hopefully) make more and more money, but does that justify spending more money? Most times, it doesn’t. We’re joined by Tracy, experienced engineer and retirement super saver to go through her budget, expenses, and investment portfolio. Tracy has had a bit of a struggle with spending and expense tracking. A purchase here, some grocery shopping there, and by the time she added up her payments, she was consistently overspending by close to a thousand dollars, every month! Scott and Mindy have some great strategies to limit this type of random spending, and put your budget in the driver’s seat! Tracy is also interested in acquiring a rental property in mid/late 2021, but she doesn’t have the cash savings she needs to do it. That doesn’t mean Tracy lacks money. Quite the contrary, Tracy has a very respectable amount of money stored between her different retirement accounts. She was lucky enough to take advantage of her company’s 15% 401(k) match (seriously, 15%)!  Now the question is: does she limit her contributions so she can save up for a rental property or does she continue to max out her retirement accounts so she has a big cushion when she decides to stop working? This is a very common question we get from listeners and members of the BiggerPockets community. You may be in the exact same position, all we can suggest is to tune in to hear what Mindy and Scott have to say! In This Episode We Cover Why employee match programs are so valuable for retirement investing Whether or not you should keep an expensive car loan (or sell and get a cheaper option) How to fight lifestyle creep and focus on your spending and investing  The importance of manual expense tracking and budgeting How bigger shopping runs can minimize your food budget every month What type of savings you should have before buying a rental property And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Dave Ramsey’s Envelope System Explained BiggerPockets Money Podcast 04 with Rosemarie Groner Waffles on Wednesday Mobile Expense Tracking App Check the full show notes here: https://www.biggerpockets.com/moneyshow162 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 162, Finance Friday edition, where we interview Tracy and talk about raining in spending. And honestly, guys, I did not just have this knock the ball out of the park year in terms of savings because every other day, the boxes are showing up at the door from Amazon with something, you know, from Target, with something, you know. So as much as I would like to have thought that this year of any other years would have been the year that I could save, it really put a mirror up to my spinning habits. Because even sitting at home, I did not just pile up and stack up, you know, lots of money and cash. Hello, hello, hello. My name is Mindy Jensen. And with me, as always is my coming in with a record. of four and nine, definitely not the champion of the office fantasy football league,

co-host, Scott Trench, who's going over, you need to watch this on YouTube because he's going over to get his big world champion, undisputed champion, except not of the bigger pockets fantasy football league, Scott? This is from 2019's fantasy football season. So I will be relinquishing both this belt in my league with my rugby friends and obviously came in close to last in our office pool. So not such a great year for fantasy football this year, but thank you for putting that out, Mindy. Scott and I are here to make financial independence less scary, less just for somebody else,

to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or simply begin building a little bit of wealth outside of just your home equity and retirement accounts. will help you reach your financial goals and get money out of the way so that you can launch yourself towards your dreams. Scott, I am so excited for today's episode because Tracy is, I think, experiencing a problem that a lot of people have.

She's a high-income earner. She's living in a low-to-middle cost-of-living area, so she should be crushing it. But her spending is a little bit out of control. And the reason that I say a lot of people can relate to it is, she's not spending $25,000 at a time. She's spending $100 at a time, $150 at a time. And when you make the salary that she's making, why would you even bother checking that one expense?

Well, it's not the one expense. It's the one expense that happens multiple times a day or multiple times a week that is really starting to drain her cash accumulation activities. So I just think that there's a lot of people in her situation that are doing the same thing. Yeah, I think the consequence of doing it the way that Tracy's done it. And by the way, let's let's take a step back and say Tracy's doing great. She's got the income. She's got a net worth. I think we pay it at $800,000, a very strong retirement account. Lots of things going right. It's just a kind of, again, a classic example of this problem of a person who seems like they're doing really well on paper, but all their wealth is in their retirement account or their home equity. And they just don't have a lot of the cash available to do investments like real estate or to have liquidity for. a business opportunity or to otherwise have opportunistically available and feel like there's an abundance of money in the here and now. And so that is the problem that I think we're tackling

with this episode. And I think the root cause is once that money hits your bank account, if you don't automate or have a plan for that money right away, it's just going to flow through your position unless you're controlling it and again being very intentional about that cash. And that's what we talk about today, I think. And I think Mindy Haley has the meat of the tips on how to manage those kinds of decisions here. So thank you. Yeah, I'm not going to suggest some fancy-dancy app or newfangled techno gadget. I am going to go way back old school and suggest an old-fashioned pen and paper to help Tracy out. I think that's going to be hugely helpful for her because it was hugely helpful for me when I did it. And it can be a

long-term solution, but it could also just be really, really eye-opening short-term that leads to something else that's more convenient for you. Before we bring in Tracy, Scott, I do need to tell you because my attorney makes me. The contents of this podcast are informational in nature and are not legal or tax advice, and neither Scott nor I nor Bigger Pockets is engaged in the provision of legal tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal, tax, and financial implications of any financial decision you contemplate. Is that good, Scott?

That was great. I think we really covered ourselves. Now let's go talk to Tracy about money. 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. That's why I like Monarch. It helps you see exactly where your money is going and more importantly where your tax refund can make the biggest impact. Because the goal isn't just to look backward. It's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. year. It brings your entire financial life, including budgeting, accounts and investments,

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who say, Sound makes everything easier, expenses, income, profits, taxes, invoices even. So reclaim your time and your sanity. Open a found account for free at found.com. That's F-O-U-N-D-com. is a financial technology company, not a bank. Banking services are provided by lead bank, member FDIC. Don't put this one off. Join thousands of small business owners who have streamlined their finances with Foun. Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles.

Lately, I've been listening to Bigger Liener Stronger for Fitness, the Anxious Generation for Parenting perspective and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at Audible.com slash BP money. Tracy, welcome to the Bigger Pockets Money podcast Finance Review. I'm super excited for you to come on

the show today. Yes, I'm excited to be here. Tracy is a single woman in her late 30s with an impressive six-figure salary in a low cost of living area. Her retirement accounts are going to make you drool because she has an impressive 15% company match. So it has a very healthy balance. Why is Tracy here today? Expenses. Tracy's expenses are just about equal to her salary. So today we're going to talk about cutting spending. Tracy, I am super excited about your story because I can totally relate to it. And I would like you to share with our listeners a little bit of your background, your salaries, your expenses, your debts, your investments, that sort of thing. Let's start with salary. Yeah. So with salary, I make into over 150,000.

$50,000 a year. So I'm an engineer. And so in that range there. Wow. Yeah. So you got that down. Check. Okay. Now let's look at. Is that between base and bonus? Or is that combined or is that just the base? That's based because bonus can vary. So, you know, bonus can be for the range that I'm in 15% or more annually. But in years like this year, our company has said that's going to be zero. So, you know, coming up. So I don't really count it. So, yeah, just base salary is in the range of over 150.

Awesome. And then how much, so how much would you say, what does that translate to per month and take home pay after taxes, would you say? So I always struggle with the term take home because I'm like, do I count deductions that I choose to have, you know, like 401K. But if we talk about literally just what I love. let hit my bank account and not including the things that I have taken out like company stock options and things that I don't have to have taken out, but that I choose to, I personally see about $8,000 a month. Great. So that means that you're investing very heavily in some really smart matching programs and the stock purchase programs because what that tells me is you're taking out a lot

of that paycheck for long-term investment with the company. Yeah. So as many alluded to, so my company is very generous with 401K, they do an automatic 10%. It's not a match. It's whether you put in a dime or not, it's like, we're going to invest that in you. So it was on a scale. So my first five years, it was 2.5%. And then the next five years, so years five to 10 was 5%. And then once you reach 10 years of service all the way through until you're no longer with the company. It's an automatic 10. So then jump in 10% into your account before you even get to the match. Is that what I'm hearing?

Before you even decide to put in a dime yourself. Awesome. Great perk. Wow. I think bigger pockets should do that too, Scott. Yeah, that sounds like a great perk. And then in addition to that, I personally, when I first started out from day one, was doing 10%.

And then I eventually increased, I would say probably the last three or four years, I've been doing the whole 19,000. And then what became 19,500 and then what would be 20,000, I think, in 2021. So I've been maxing out the 401K for the last probably three or four years. And prior to that, I was just, in addition to the 10, the company was putting in, I was also putting in 10%. So you're getting 15,000 from your employees. just as a dumping into your account that there's no match or anything like that. Then you're putting 19,000 in. And then there's, is there a match on top of that as well?

No. So then that's it. So that's the total that goes in each year. So there were years on average. I was, you know, close to $35,000 being put into my 401K. That's fantastic. That's got a done very well, especially in the last couple years. Now, do you know how that, how are you investing that within the 401K?

Do you have an index fund option or something like that? I do. So my company actually, I say used to, because unfortunately they just pulled most of them, but they used to have a very generous amount of mutual funds and index funds to choose from. And so I have a financial advisor who was taking advantage of that, right? And using their expertise to diversify my portfolio using the options that we had. And it was well over 100 options. But just this year, they've decided to pull back the number of options they offer. So my portfolio look a little bit different. But yeah, I've outpaced those, what they call those freedom funds, you know, where it says, if you plan to retire in 2050, well, you know, this portfolio will work for you. My portfolio, I think when I looked year to date this week, I think I was up at about 27 percent year to date. Great. So you've done, not only do you have a lot of money in that account, but you're doing really well within that account in terms of investing as well. Yeah, my shout out to my advisor. He's done very well by me.

I've been working with him for over 10 years now and have no complaints. That kind of growth you really can't argue with. I mean, that's pretty nice. Probably more than doubled my account since I've been working with him. I know I have in that amount of time. Well, since we're also talking about assets here, what other assets do you have? Do you have a home, cash accounts? or anything, any investments outside of the 401K? Yeah, so the 401K right now is my main asset. And so when I look at my net worth, it feels impressive. But it's like, it's not really my net worth until I'm 59.5.

So outside of my 401K, which currently the balance is sitting at around 690,000-ish. in that range, it depends on the day, obviously. I have equity in my home. So in the townhouse that I purchased, I did the whole 20% down, and I've been there just under two years. So I would say basis what the market says my house is worth and what I have, I have probably about $65,000,

$70,000 worth of equity in my home. And then in terms of other stock options, So my company also offers a stock purchase option where you are able to put in, I'll just say, for round number, $7,000 a year into your company's stock. And then with that amount, they'll give you a 15% discount the first week of January. So unfortunately, I let that money sit over the years. I say unfortunately because this year has not been good to my industry. So a portfolio that would normally be worth probably about 20,000 is only worth about 11 right now in terms of stocks. And then I have about another 10,000 or so in stocks.

So in addition to about the $70,000 in my home, the 401k account, I have about $20,000 just in stocks. I have some Apple. I've been playing around in the market. I have some really awesome friends who have really gotten into this this summer. Like we've kind of used COVID as an opportunity to really learn more about, you know, trading and investing. And so they've really been just a great circle for me and bouncing off ideas with them. And so I've played around in that space. So with that about 20,000.

And then in terms of cash, I have about another 15,000. Awesome. This is a really good, strong position. I love it. I love how the majority of your net worth is invested over the long run under the guidance of a financial advisor. Personally, I just use index funds, but I think that approach is wonderful with your financial advisor with that. And you're also, I think that while there's all this discussion about playing around in the stock market and whether that's the good return or not, it sounds like I think it's a wonderful approach with the relatively, in this case, small amount

of money that you're using with those types of things. And I think that it's a really good way to keep motivated and interested and you could definitely potentially generate some good returns if you find an engaging hobby there. So I think your your asset distribution is actually really strong in a lot of ways. But one thing I want to note is that you don't really have as a percentage a lot of wealth outside of your home equity and retirement accounts, which is a very, very common situation that a lot of folks find themselves in. And something that can be, it just maybe doesn't feel like you're doing as well as you are on paper sometimes. What do you think? Is that that's literally what drove me to write you guys. So when I saw Mindy's Facebook post,

you know, saying, hey, would you be interested? That that is what drove me here. Is I've been telling her, you know, I'm beating myself up because I see, you know, I'm not in anyone else's bank account, obviously, so I don't know what my friends have, but I have that game, right, where you compare yourself to where you think other people are. And so, you know, I'm constantly. feeling behind the eight ball. I'm seeing the opportunities that my friends are able to capture because they do have, you know, cash on hand and things like that. And just feeling like I'm at this age, I'm almost 40, and I just feel like I don't have

the cash that I should have basis, the salary that I make. And so that's the part where I find myself constantly. beating myself up is definitely over feeling like I should have, you know, more cash to jump on investments, you know, more quickly as I, you know, others that I know are able to do because of the cash on hand. Well, I wouldn't beat yourself up too much. You're pretty rich. So things are going pretty well. You've made a lot of really good decisions at these types of things. But yeah, I think that that's kind of something that struck me when I was kind of starting of this journey was I think that there's a power that comes and a control that comes with building some wealth

in those other accounts, this concept I like to call financial runway, that readily accessible wealth that's specifically not in retirement accounts or home equity, that enables you to have many more of those options in those types of things so that you can realize that power, you know, in three, four, five years rather than in 15, 20 years at the age of traditional retirement. So is that kind of the goal is to kind of think about, out how to, in addition to maintaining some of the great things you're already doing, begin building that excess runway or wealth outside of that home equity and retirement account? Yeah, that's definitely it.

Like I said, I have been very blessed and fortunate to just throughout from friends from high school all the way through college and those that I've made in my career, just surrounding myself with, you know, women who are driven in that space, right? Building, we talk a lot about, you know, residual income and we have a lot of, you know, of conversations about having diverse portfolios and now the whole, you know, fire, you know, model and concept comes into conversations that my friends and I have. And so it's just really saying to myself, residual, I have, you know, a friend who will say, you know, I have enough rental income. I have actually multiple friends who have enough rental income from investments

to cover their normal monthly expenses. So they're nine to five paycheck. They're able to build that to get more investments. That's the type of, you know, goals that I'm looking for when you're talking about how to build outside of the longer term savings. I'm looking for, you know, having enough residual income to where I could replace the money that I bring home on a monthly basis would be awesome. And then being able to use my income to then just build even more. Love it. So, so to me, there's a couple of the elephant and the room is you've got this immense retirement account. The question is, do we begin siphoning money away from the retirement account or do we cut other spending in order to accumulate that in the

short run? I think those are the two options in your situation right now, right? As things stand. And you have that big bonus every year, which could be another way to produce that. But is that kind of how your assessing the situation is really the biggest choice? Yeah, definitely. I have spent my way through my 20s and my 30s. And I'm, you know, at a point now where I'm definitely looking back and saying, where did it all go? I don't have a Birken bag to show for it. I don't, you know, have closets full of frivolous designer things to at least say like, this is where my money went. It's just one of those situations where I ate it. It was on a plane with me in business class. It was, you know, it went with me to, you know, the other parts of the world that I've,

I've been blessed and fortunate enough to travel to in the way that I like to travel. And so it's trying to find that balance now where the target runs and the Amazon runs that seem small in the moment are what's really adding up, right, over time. And if I stepped back and looked in a year in terms of what I've spent literally just between Target and Amazon, I'm probably sure I could have very close to a down payment on a rental property. Well, let's dive through those expenses one by one and create them. Well, I was going to say, this is not the beat up Tracy show. This is the, this is, you know, and I can see where you're coming from. You look at your $8,000 that hits your bank account. And you say, well, I can afford this at Target. It's only $100. $100 out of $8,000.

thousand, that's nothing. I can totally see the mindset. And I bet there's a lot of people who are listening who can see that too. Oh, well, why should I have to put myself on a budget? I make good money. Well, you don't have to put yourself on a budget. You want to put yourself on a budget. And putting yourself on a budget can be really, really restrictive and, oh, I'm doing this to myself. It's like being on a diet. Oh, I can't have anything fun. And that's not the case at all. But I think that you are starting to realize that you maybe need to curb that back a little bit. You can't have cake every night, but that doesn't mean you can't have cake on Thursdays or, you know, have a nice ex-Bedict on Saturday morning, every Saturday morning, just not every single morning. So let's go through your

expenses because right now you're killing it in the income front, but I know where those expenses are for November. So I have a little bit more information than people who are listening. And I just want to reinforce that this is a very common situation that Mindy and I have come across where like it's just however much if you don't keep a budget over time, you just kind of spend up to the amount that you're making and you've got it all right. You've got a good solid emergency reserve. You've got hundreds of thousands of dollars in your retirement account. You've got a home. There's nothing wrong with the situation that you've created here. It's just I love the fact that you're coming in and thinking like I could be over here. doing these other opportunities and you're right. And that's why we do the budget and the focus on expenses is not because it's necessary for a traditional retirement, but it is necessary to get way ahead on that journey to financial freedom and begin plopping down $30,000, $40,000 on a rental property, for example, and build in a serious passive income stream or portfolio over five, seven years. You know, that's where this power comes from. And you want to

put yourself on a budget so you can do that because that opens up way more options. And if years, then likely what the happiness level you're getting from your current spending is in some, but not all cases. For sure, you know, just looking back and saying, where did it all go is the part that's quite frustrating, right? On just a monthly basis or even looking at the end of a year and having that conversation with myself. And I'm one of those people who are my little spreadsheet that I sent.

I was telling Mindy, I've kept this spreadsheet of every paycheck I've gotten in the last 15 years. The problem is it's not a budget. It's just an account of what has been spent. So I can tell you what my light bill was in December of 2008. So I know like how much the bills were, but I can't tell you in that same month how much went towards food, you know, or target, if that makes sense. So I've used this spreadsheet to just keep track of each paycheck and the bills that are paid out of each paycheck. But unfortunately, I haven't used it as a true budget or a form of accountability. So there may even be buckets you'll see on there where I budget, but I don't use it to hold myself accountable.

Well, great. I'm really glad that you've tracked your spending because that makes this analysis easier. Can we kind of overview where you think on a monthly basis, you know, to summarize, that money is typically going now that you've, you know, over the last maybe six months to a year? Yeah. So the last six months to a year, for me, mostly, most of what I, you know, spend on a monthly basis in terms of home expenses, like if you just said, pay your bills and you be done, I would say, and if you include my card note and things like that, I'm probably close to around $3,500. a month, maybe give or take. Because fortunately, we talked about the cost of living where I live in Pittsburgh. I have a three-bed, two-bath townhouse. It's not very big. It's only about 1,400 square feet, but it was a newer condo when I got it in the sense that it was less than 10 years old. And my mortgage is under $1,200 a month. That's not very significant given your income. No, correct. And so I have, I've bought below my means in that respect.

in terms of my mortgage. And then my car note is a little bit hefty, but one of the things I wanted to talk to you all about was potentially getting rid of that. So when it came to purchasing a new vehicle, I decided to put down a substantial down payment. So I put down almost 30% on the value of the car in a down payment, about 30%.

And then I financed the rest over three years. So I did 36 months. and I did it at 4%. So this was a couple years ago before we kind of had the low interest rates we have now. So I do still have a card note that I'm thinking about getting rid of.

I don't have any other debt other than my mortgage in my home. And so when you add those things in and, you know, utility, cell phone, subscriptions, all those things kind of start adding up. And again, I end up with about 3,000 to 3,500 a month in expenses.

And how much is that car payment per month? It's 700. Okay, great. So when I think about the car payment in general, you've got, what's happening, why that feels like a huge chunk of money is because you've got this relatively short-term loan over three years.

And so that's why you're seeing a huge payment there. And while that feels like it's a lot of cash coming out, I'm interested to see if after we go through all this stuff, we come back to that as the real source of this. But from my seat, relative to what I think many of your peers, for example, might be doing at your level of income, I think you've made a set of very responsible and good decisions that will set you up for success with this stuff around your mortgage

and likely your car as well in a relative sense there. Yeah, so that's one of those things I was looking at to say, you know, the end of this year and the next couple of days, I could just get rid of it. Would that be wise? So that's definitely one air of advice I'm looking for from you all. Is it worth dumping the remaining balance, which is about $13,000 and then keeping the $700 a month, right? Or is it worth keeping the $13,000 and continuing to pay the $7?

Outside of that, I do give myself an allowance, which is going to sound excessive to most because I think my friends think is. excessive is I give myself $800 every other week. Now, I don't break down what that includes. So that $800 is supposed to be everything that's not a bill, right? So gas, groceries, eating out, Target, you know, Amazon, all of those things are supposed to fall, you know, getting back pre-COVID, getting nails done and things like that. All of those personal care things. were all supposed to be a part of this $800 every other week, so $1,600 a month allowance that I was giving myself. And the issue is that I have the Chase family of credit cards

where the point system is pretty amazing. And so I justified using my card to earn the points. and I pay the balance, like I don't pay interest, but if I'm honest with myself, that would technically mean that the balance every other week would only be $800,

even between the three cards. And that's the problem. That's not the case. I'll get to the end of the month, and now I'm having to pay $2,500, you know, to keep the balance at zero versus paying $1,600. You know, so,

that's the problem too, is that I'm not on a cash system, even a debit card system. I'm using my credit cards for everything, a stick of gum. I'm using one of my chase cards to purchase those things. And it's giving me more wiggle room than I should allow for myself. Got it. So this sounds like, it sounds like what I'm hearing is you've got $3,000 a month in what we call fixed expenses around your mortgage, housing expenses, car payment, those types of things, gas, all the kind of stuff that you need to run your household in a general sense. And then you've got 5,000 that's leaking through if we're talking about 8,000 in income after tax, more or less. Are you still saving a few hundred or a thousand or so a month after this in a general sense? Yeah, in the general sense.

So all of that money that comes home, I do put some of that into savings, right? So I would say the $3,000 that goes towards the home expenses, and then I have another $800 that I put into a savings account, another $600 that I put into a travel allowance account. So I take that money, and it's also automatically siphoned away from me. I yield. I'm doing air cord. Sorry, by that. It used to be. Yeah, they got you in at, you know, 3.25, and now it's like one.

Okay, I have a lot of things to say. You've asked about a lot of things. Should you pay off your car? Should you, I'm looking at these expenses, and I have comments there too. But should you pay off your car? So let's say you have $13,000 in cash that you can put into your car. Do you have additional money in January that you can put into your Roth IRA to max that out? I think that's $6,000 next year.

Yeah. So I think I would be left with when I did the math, I think I would be left with enough to still have probably close to $6,000 to $10,000 in cash to where I could either fund or Roth or I can leave it as my six-month living expense or whatever the case may be. So it would not leave me cash poor, so to speak, to pay my car off. It would still leave me with cash. Okay. How much is your car worth? So that's a good question. It's an Audi. It's an A4. The value of the car, I would guess I could probably sell it for at least 25 to 28. It's a 2017. It just, it has a lot of miles on it. How much do you like the car?

I like it a lot. I've been driving Audi for now. That's one of the other mistakes that I have kept a secret is I love. released a car for six years. And that is also one of the reasons I find myself at this age and stage of life with a car note. It's because I got bit by the bug of wanting the nice, fancy, and so I leased a really expensive vehicle for six years. I had two vehicles over the course of six years. And then I decided to settle into a compromise. So this was the compromise car. This is not the beat of Tracy show. Great. Yeah, let me just say, like, this is all in the context, do you have a net worth north of $800,000 before you age of 40 doing really well. So like, like the Audi is not as a big problem for somebody who is just getting started and, you know, is trying to build that first, you know, 50 or 100 grand in wealth. That's, that's a tough anchor on that. It's not for you. I was just wondering because that is an opportunity, but it is not the old. You can choose one of or a few of several levers here. You did not have to choose a cheaper car. You do not have to choose cutting back on your travel budget or whatever.

But I think you're going to have to choose to cut back on some of those things and rank order prioritize them and say, which ones of these do I like better than having that liquid net worth and my retirement account balance? And which ones don't I like better? Which ones do I like better? And which ones am I, you know, I'd really rather have a couple of those rental properties in that cash flow. I think that's kind of the choice that you're going to have to make in terms of the spending here.

really what I usually find is that the anchors in a person's spending situation are really the housing or the car payment or the monthly food budget and those types of things. In your case, your fixed expenses in terms of your grocery budget, your mortgage expense, and then, you know, depending what we do with this car payment, really aren't the anchors that are the leverage points. We do have something on the car payment that will free up cash flow. It depends on what cost we're going talk about with that. But I think it's really in the discretionary spending piece here, which I think is really Mindy's forte is kind of dissecting those and moving through those. So in your case, it really is that because we're saving 800 bucks a month on $8,000 in income. And I think you could

be saving $3,000 to $4,000 a month easily. You know, as long as you're, you can have any of the things in your list, but I don't think you can have all of the things in your list and create that savings position, as Paula Pantt would say, I'd afford anything. Yeah. So my go-to recommendation is track your spending. And I know that that sounds so boring and so repetitive because I know you've heard me say this a lot, but that is going to be so eye-opening. And I don't even want you to get some fancy phone app.

What I want you to do is get some really old-school notebook. I know you're an engineer and you're all smart. but this is what you do. Get yourself a notebook. We'll get a big one. I've got a big stack of notebooks here. Hold on. I'm going to grab my notebook.

Grab a whole size notebook and open it up to the very first page that doesn't have any writing on it. I've got so many that are just like. And make columns. Date, store, dollar amount, what it was, total. And start running every time you spend a dime on your credit card. Write it down. Anytime you pay a bill. Anytime you do any money out of your pocket goes on this page. And about three days in, you're going to be here on the page. You're going to be like, wow, how did I spend so much in such a short time? And then as you get towards the end, this is supposed to be for one month. So when you turn the page on the 17th, the first time you're recording your expenses, you're like, oh, oh, wow, that's, I'm already on page two.

oh my goodness, what is Mindy going to say? It's not going to say anything because Mindy's not the boss of you. But Mindy is going to say, oh, no, Tracy's going to say, oh, I better stop because it becomes a game. Yeah. And that's the part that was so helpful for me was having this in my face. I know everybody listening is young and super hip and cool and they use all these apps on their phones. I'm old and I wanted it up in my face. And this, I put it on the kitchen counter, which is where I came into.

to the house. And I would walk in and I would write it down. And the first time you're like, oh, $1,300 because I had my mortgage payment too. Okay, no big deal. And then you start and you're like, wow, this is getting filled up real quick. And this is such a powerful tool to see it in real time. Because the way that you're doing it now, going back after the fact, isn't working. So I would love to see you do something super old school and just watch what happens. Because when you see it, single day, every single time you come home from work and you write it down, you're like, oh, wow, this is crazy. And then tomorrow, I'm going to see if I can spend no money.

And then the next day, ooh, I didn't spend any money yesterday. I wonder if I can go again today and spend no money. And it just keeps compounding. But the first month, you're going to do really, really awful. And that's okay. It's just to open your mind, just to see what's going on. This is so powerful, though, recording. Recording it down on a piece of paper in your face is so powerful.

Another thing I want to see is you can have your $400 a week. Tracy makes a lot of money. Tracy can have $400 a week to spend how she wants on one credit card. Pick your favorite credit card. That is the Tracy's $400 a week credit card. And put that in your wallet. Mark on the front of it. Tracy's $400 a week credit card.

And check that balance. whenever you go to the store, come home and check that balance. Oh, I spent $25, there's $25 on the card. Great. Or I spent $400. I cannot use this card again this week. And then that's all you can have. Take that and put that on your Amazon account and take all the other credit cards off your Amazon account.

And then when you feel tempted to go to Amazon, make sure you're only putting it on your $400 credit card. For sure. Yeah, as you're going through this, you know, another thing, I completely agree with everything, Mindy said that. I think that doing it in real time in your case will be very helpful because I do the same thing as you. I track it in an arrears and that results in poor financial controls over my spending. I don't have as good controls as Mindy does over my household spending because I don't do it the same way that she does it. Now, that's not as I still spend so little in a general sense that that's not really my lever. But I think that that is for you.

And I'd also consider, you know, taking a leaf out of the Frugal Woods book where they kind of cut back on everything pretty substantially, something that was unsustainable. And then they added back in the things that they really missed, which could be something to consider. You're like, do I, if I spend January or February without most of this stuff, kind of really just kind of put myself in that position for one month, you know, and see which are the things do I really miss and which are the things that I not notice, that will allow you to maybe put those things back in. And it may change your 300, 400, 800 every two weeks, whatever number that you sit, you peg. It may change that for you. And then I'm going to give a wild out-of-left field a suggestion, and you can laugh it off and refuse it. But I would consider, you know, renting a newer corolla or civic or something like that and driving it to work for three days. It'll cost you a few hundred bucks.

And it might just be, you might be blown it. But there's a chance, 25% chance maybe that you're like, you know what? This really isn't that much. worse than the Audi, you know? And shoot, I should just probably buy one of these and sell the Audi and that would have a thing there. So I think that, if you're thinking about the

car thing, that could be a solution there. And then after that, we will talk about the, I think the car payment and what we think is the rate move there, whether paying that offer continuing with the payments in a general sense. Yeah, a friend of mine before I got the Audi, had definitely advised me

just get something that you could pay for in cash. Obviously, I didn't take the advice. But that's what I was advised. And I definitely have friends, other friends who have done that, right? They purchase their vehicles and cash and are happy and content. Or I have those who, you know, because they didn't lease or anything like that, they're now car note free, right? So they're driving without a car note. And so I do know that if I look back.

over the last 10 years in terms of like some of the bigger money pits for me, it has definitely been the vehicles, you know, that I have chosen to drive through the years. Yeah, well, I just think if you do that in the context, for example, of a month where you're really just cutting back and just experimenting and seeing what life is like without that very large, weekly allowance or twice week, twice monthly allowance. And as part of that, you also try out a different car, that may help you make the decision about how much you value the nice car in relation to some of those other spending things all at once. That way you can just choose to which ones you want to layer back in or keep with those.

And I think that that might be a helpful exercise alongside the writing down of all the expenses that Mindy says. I would definitely do the write down the expenses first and then kind of potentially think about that extra month. But I just, and I also think the other part of it is when you zoom out and you look at this from a vision perspective, there's no reason why after you make some change. or entract these things that again, you're not accumulating 3,000 a month, I think, in savings 2,000 to 3,000 a month, which is 24 to 36 grand per year. That's a down payment

every year on a rental property. You know, you pile that up for three, four years and then start generating a little bit more cash flow. You know, the car payment, you know, if you just choose to pay it off, kind of slides out over the next year or two, no matter what, regardless of which path you choose. Now all of a sudden you're saving $4,000 a month. Then the snowball continues. Now you're maybe a raise comes in a bonus, a big bonus. Now we're saving five or $6,000 per month. Then another year or two goes on, $7,000 a month. And we've got a significant chunk of that as passive income. That's the vision that we're playing for here from a financial perspective and the why behind this, which might help as well in the context of some of these puts and

takes on which expenses to keep and which to forego. Yeah, because it's just looking overall, like I said, with what comes in and what goes out, it's just definitely very frustrating exercise for me, you know, at the end, even in COVID, right? So in my mind, I should be saving so much money. I'm not traveling. I'm not going anywhere. And honestly, guys, I did not just have this knock the ball out of the park year in terms of saving. because every other day the boxes are showing up at the door from Amazon with something, you know, from Target, with something, you know. So as much as I would like to have thought that this year of any other years would have been the year that I could save, it really put a mirror up to my spinning habits. Because even sitting at home, I did not just pile up. and stack up, you know, lots of money and cash. And so...

I get it. You're not the only one who did this. It's so easy. You're just, you're bored. Oh, I wonder what's on Amazon or, oh, it's Prime Day or, oh, this, or, oh, I need one thing. And then something else, there's those stupid little, oh, here's a suggested item. Oh, I need that too.

And then all of a sudden, like you said, all those stupid boxes keep coming. It is really fun to get those boxes all the time. And frankly, when I don't get a box on a day, you're like, Oh, yeah, feels odd. I'm sitting here with my giant TV acquired this year. Oh, the giant one in the back? Yeah, that's pretty amazing, Scott. So in the same boat.

But I think one part of it, though, is also maybe accountability is another thing here. And it's going to be difficult to pull this off maybe by yourself over a sustained period of time. I think you could definitely do it for a couple of months following this episode maybe. You know, perhaps something to consider also is, and this is a suggestion actually, Mindy wrote, down earlier in the show notes, so I would give her credit. But perhaps consider creating an accountability group. You mentioned that you had some folks who invest and those types of things locally. Maybe you could create a little monthly little club or something that would, where you bring some of those things and talk about those goals to other people so that you're,

you have some sort of structured accountability program. And if you don't have, if you feel like that would be uncomfortable with some of those friends, you can always try like the bigger pockets money Facebook group and see if some people there might be interested in that either locally or virtually. I have friends that I would completely trust who have volunteered to do this before, but because I knew they would do it very, very well, I turned down the offer multiple times. Now it's time to call them up and take them up on the offer. Yeah. The friends, I definitely, like I said, I have been very blessed and fortunate to have surrounded myself with just very intelligent, successful women.

And there's plenty of them who would literally, you know, that I would trust with, you know, my personal information and that would truly with nothing but my best interests at heart hold me accountable. And I've been running from them because the offer had been made. but because I knew that they would really do it and that they would really do it well, I wasn't ready. But now I'm definitely at the point where it's like, okay, you've tried it your way, you know, your Excel spreadsheet and I've done it. I've done it all, I've done it. You know, all the apps and things like that.

I've done it all. And now it's at the point where, you know, I've done everything but the envelopes, you know, method, the Dave Ransey envelopes. I've done everything with Amelow's, but Minnie's telling me to go back to old school paper, and I can do that and then share that with those friends so that they can be like, you didn't need that. And let's also, we'll point out something here. There's this problem, I think, in America in general, where money is taboo to a certain extent.

It feels like a competition. You feel inferior or whatever when you're talking to other people about money and these types of things. You're doing great. you are doing wonderfully with your financials and those types of things. And you imagine how many people are listening to this who aren't coming from a position of financial strength the way you are who think about that. Like, no, the goal should not be to compare or there's all these other things. It should be, here's my current situation.

And Mindy calls it it it's, it's me against the world. It's not me against this person or whatever. It's me against the world. It's us in it together. And it's progress, not perfection. There's nobody we've ever talked to who's been perfect with money. Mindy and I certainly are not perfect with buddy, not close. And so it's about just where am I at right now and how do I improve?

And my life becomes better as I improve. And there's no such thing as perfect. Even if there was somebody who was theoretically perfect, there's so much art to how to invest and think about savings or whether to buy versus rent or whatever that it's impossible. So it's just progress, not perfection. And making sure that it's a healthy, fun environment that's focused on just getting better each month rather than a relative comparison or whatever. But I think a lot of people have that problem when it comes to talking to other people about money because you might be comparing yourself to

someone you think, they might not often be this way, but you might think has more wealthers doing better than you on that. Yeah, because I'm definitely not in anybody else's wallet or bank account, but, you know, just seeing kind of the habits and, you know, the decisions my friends have, you know, been able to make the positions they've been in to make in terms of investing or the wiser decisions they've made, like I said, with paying cash for vehicles and, you know, living below their means. I've just had really great examples, you know, and, you know, it's very fortunate to be surrounded by, you know, friends who don't encourage my foolery and would definitely be willing to hold me accountable in that space. It's just, it's just been really good to surround myself

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Business. Yeah, I love your friends. Tell them. I said, I love them. They sound really, really supportive. And that's really what you need. You need somebody who isn't going to be like, Tracy, this is the dumbest thing. on earth. You need somebody who says, Tracy, this is something you didn't need. So next month,

let's, you know, fix that. Something, when you were telling your story, something jarged my memory when we interviewed Rosemary Groner way back on episode four from the busy budgeter. She said that one of her big things when she was budgeting was these little trips, these little, you know, oh, I'm just going to the store. I'm going to grab one thing, but one thing turns into 20 things. And what helped her a lot was to create a little pantry in her house. So you go through, I don't even know how much deodorant somebody goes through, because my kids, I don't know if they're like writing letters with it or what, but I seem to go through a lot of deodorant. So I don't go to Target to buy one deodorant. I go on Amazon and I buy a case and then I don't have to buy deodorant for another week or

whatever they're doing with it. So what are the things that you are constantly buying at Target specifically, at Amazon specifically that you need, but you can store in your house. So like not milk, but, you know, deodorant is a great one. Feminine hygiene products are a great one. Toothbrush, floss, toothpaste, anything that you can use, I would say, three or six months supply, buy that and put it in your house. You have enough money that you were fortunate enough to be able to afford to stock up. So go through and think, I think I'm going to go through a deodorant a week for six months.

I'll need 27 or however that math works out. And just get that and put that in your house. Put it in the spare bathroom or even in one of the closets. Just have it. So when you need to go to Target, you don't really need to go to Target. You can just go to your closet. Call that Target. Yeah, that would be great because my other vice that it hasn't come up yet is Trader Joe's.

and it's weekly trips to Trader Joe's and I swear whether I have 25 items or two my life is always $120 before I leave out of the store every week and there and then if you look at the eating out budget on top of that there is no way I should have one person should have $120 a week in groceries

plus the amount that I'm I'm spending eating out. It's, it's, it goes to show that there's definitely waste in there. Well, that's, how much do you think you're spending on eating out? So I did, Mindy's had a preview of this conversation recently. On a really, really bad month, I have spent as much as $900 in a month eating out. So, so what that tells me, what that tells me is, is that you could spend more on groceries if you cut down your spending on eating out to $50 to $100 a week, which is still a lot. But you could go up to $150, $175 in groceries, which is a lot.

And still be making a huge dent overall in your overall food budget here. If you were to plan that a little bit more and even go a little bit more on the grocery budget and those types of things with some of those nice things. Oh, my goodness. My waistline would thank me. in addition to my wallet. It would just be a win-win all around. Prior to moving to Pittsburgh,

I lived in New Orleans for nine years. And so their motto is that, you know, we don't eat to live. Like food isn't just nourishment. We live to eat. Like food is made to be enjoyed, right? And so that's where I kind of cultivated this really insane food budget. was living in New Orleans and, you know, eating out constantly.

And moving to Pittsburgh has helped some because the food is just not... We don't have to get. Don't do it. Not quite as, you know, seasons and, you know, as it is in New Orleans. So I eat out less. And there's definitely more room and opportunity for, you know, really raining that in. I think for me, though, unfortunately, Trader Joe's had just become another place to fuel my shopping habit.

It's not even necessarily where I need. You guys, I drive an hour round trip to go to a Trader Joe's. Oh, stop. It's not necessary. It's 30 minutes each way. Do you have acts? Is there a place in your house? Do you have a garage that you could put a freezer, like a chest freezer?

Mm-hmm. Okay, there's a chest freezer at Home Depot right now for like $199 or $250. I can't remember which one. It's a nice-sized chest freezer. Yeah. Fill up the bottom with ice because you don't need that much space to fill with food. Fill up the bottom with bags of ice and then go to Trader Joe's once a month. Yeah.

Go out there, know that you're going to go once a month. It's going to be a larger expense. But fill up that freezer with Trader Joe's food and then go shopping in your freezer instead of going shopping at actual Trader Joe's. An hour, you didn't tell me you drove an hour round trip or one way? One way is 30 minutes. So just

around just there and back, you've already wasted an hour. And it's become like a little cult thing. So I'm in this place. That's how she gets her bigger buckets money in. I know, right? That's how listen to my podcast, right? So I'm in this group that I just love. I call it jokingly a cult. It's called

Black Girls in Trader Joe's. It's a Facebook group. They have merchandise Guys, it's amazing. And it is, it's a whole thing. And you just go, you know, through there. And I'll be in the store in the Facebook group. You know, what did they tell me I need to try today? Well, just think about how amazing your contributions to the group are going to be when you do this enormous run once a month.

I know. Instead of these littler ones every week, you're going to, it's going to be. Yeah. I have to doubt back. And let's look at, instead of going all in and going once a month, go once every two weeks at first and see how that feels and see, you know, did I get enough things for the week? Oh, no, I should have gotten more of this or that. But, wow, 30 minutes to Trader Joe's. It's, that keeps me from going to Trader Joe so much because it's 30 minutes away.

I know. I don't want to be in the car that long. Let's go back to the car loan thing, though, because I know that was one you specifically had. And I think, I think it's helpful now to revisit that with all this other contexts we've had. So what are your questions is that? I think you have $13,000 balance and a 3.5% interest rate on that car load. Is that right? Yeah, 13,000. I think 4% unfortunately is my current interest rate. And so the note is $700 a month. And I have another year left on March. Well, March will be a year. So I have about 16 months left on the car note. So I'm at the place where, like I said, I could literally click a few buttons today. and be done with it and then say, okay, now I have this extra $700 a month to save or do,

you know, invest in with, or do I hold on to the $13,000 and just still pay the car note for the next year? Okay, so let's put this in perspective here. Four percent of 13,000. That's how much, this is how much interest you're going to pay over the next year is $520. Okay. So this is, this is, I think, a good example of one of those things. Like, it seems like it's a big decision, but it's really not. You're really talking about do I spend, do I say $500 in interest or do I not, right? That's the context of it. In your case, I think you've got an emergency reserve about $15,000 is what I heard.

And your goal, I think, in general, is to save up for a rental property in the next two years or so. Is that also right? Yeah. And the next year or so, hopefully I would have, you know, the $30,000. So, yeah, in terms of cash right now, I'm looking at having, you know, once my company stock, you know, purchase comes through because I'm not going to hold on to any more shares of that. So basically, by the end of January, I'll be sitting on about 30,000 in cash plus the, you know, 20 some odd thousand in stocks. So that's before I paid the car off. So I have about 50,000 I could play with if I wanted to.

Okay, and when do you think your timeline is for buying a rental property? Do you think it's going to be in January? Do you think it's going to be closer to the end of next year? Middle to end, because I really, you know, want to out of the learning I've done with BP. I want to be smart about it. It's more than just having the down payment, you know, that I've learned from you all. So really for me, now, I've also talked about investing with friends. So it could be sooner just because I wouldn't be the only one carrying the entire, you know, set of expenses. So in that case, it could be as soon as three to six months. Okay, great. So here's how I think about it. If you're going to have $30,000 at the end of January and you're going to invest at the end of next year, there's no point in paying the 3.5% interest that you may as well save yourself 500 bucks and pay off the loan now and not be sitting on, not be arbitraising a three and a half percent interest rate for the 0% or close to 0% you're going to get in your checking account while you wait to invest at the end of next year. If you're going to invest sooner and need

the money, in that case, you shouldn't pay off the car loan because you'll need it, you'll need it there. But, you know, if the timeline were longer five years, I think it'd be an easier decision to say, don't pay it off right now because you'll want that cash sooner to invest. But since it's only one, you only have one year left on the note anyways, you're going to pay it off over the course of the next year. To me, I think the move is, it's just pay it off now, save yourself the interest if you're not going to use those funds. That will slightly dampen your emergency reserve, but it also sounds. like you're not going to use it right now. Right. Yeah, it's not something that I know I don't feel like

I would be prepared to pull the trigger in January, right? So for me, it would just be an opportunity to be rid of that debt. Because honestly, the plan was to have done it in January of last year with that company stock I had sitting. So like I said, that stock today is only worth about 11 or 12,000, but in terms of value, and when I purchased it, it actually was worth 20, 25,000. And that's what it was at in January. So I said, oh, I wait a few weeks, you know,

to sell it and pay the car off. And then March happened, right? The world stopped. The market crashed, and I never recouped that money. So it's kind of living in that, you know, regret, right? of saying last year I was going to pay it off and then the money got tied up and, you know, didn't.

Yeah. And let me just say something. That employee stock purchase plan, that is a no-brainer to me. You buy the stock and then you sell it immediately or you hold on to it for two years or long term or whatever. But like, you're getting 15% discounts. That's a high probability rate of return. You got unlucky with your timing in that situation.

But I think you made the right decision. It's kind of separating the good. decision, bad outcome from bad decision, good outcome. You made a good decision, had a bad outcome with that. I would do that again and again and again and again. And over the long run, you're going to win from that depending on, you don't have to keep the stock, right? You can sell the stock whenever the time is up, right? Right. Yeah. Yeah. So you get it in the first week of January and then by the time it hits your account within a day or so, you're able to sell it. So assuming the market doesn't do anything hugely or wildly crazy, you can capture. You can

capture your 15% or more because they do the price between the lesser of January 1st and December 30th. So 15 is your minimum. There have been years where it was 30%, you know, on the dollar. I had the same thing at my old company. And what I would do is I would just put a hundred, you could buy up to 25,000 in stock. And so I only made like 45,000 at the time. And so I put all of my paycheck into it and arbitraged it and sold it immediately. And so I made, Immediately hit my account and sold it. Yeah. And I took that extra stuff and they're like, what are you going to do?

You're going to pay taxes on that gain? I'm like, yeah, that's what you do with a raise. Yeah. I'm not going to say no to a raise. But yeah, I did the exact same thing. And yeah, you're going to get unlucky every once in a while. But it's the right move, I think, to take that free money, that 15% spread and just arbitrage it. Or you can keep it invested for a few years.

So if you're listening and you have one of those, I think it's a no brainer to do it, even though you might have a bad outcome every once in a while. It's the right bet every time. my opinion. Just go for it. Okay, so going back to the car thing in general, I just wanted to point out that in the context of your overall set of goals here. I mean, you could save $3,000,000 a month by really getting smart about your spending, writing things down, like when you said, having an accountability group and really kind of getting those controls in place on your spending. This is not a high-stakes decision rather to refinance the car. Higher stakes decision would be

selling and swapping out the car or changing up something else there. You don't have to do that or any of those things. But I don't think you have a big decision here. But if you're not going to buy a rental property until the end of next year, I'd just save yourself the $500 and pay off the debt now because you have a big enough emergency reserve and access to liquidity that you don't need the cash. That's a reasonable arbitrage of that cash, I think, versus paying the interest on it. Yeah. So it's just something that I would love to. just get rid of, you know, if that makes sense. And you'll feel better. It'll be, it'll be accumulating $700 more a month right away, which will be a big difference in how much

you're accumulating on a month-to-month basis. Yeah. And I would like to see that $700 a month going into your rental property down payment fund. And coinciding with that, do you have a real estate agent in the area that you want to invest in? Are you investing locally? So not Sure. Again, I've seen, you know, friends carry different strategies, some who invests local, some who have become realtors themselves. I have a few friends who have done that to help themselves with the investment. I have a really good friend in a different market who is willing to become combination of realtor and potential investment partner. So I'm kind of a little bit all over the place when it comes to what strategy. I want to kind of undertake with that. So, because even my house, my job assignment is only a few more years left in it. And because the mortgage versus the amount I could get in rent is quite a bit of a delta. Like I could say, my mortgage is under 1,200.

And I think I could probably get $2,000 a month in rent. So I've even, you know, toyed with the idea of turning my current property, you know, into one of my first investment properties, right? And does the tenant pay utilities typically in Pittsburgh? They do. They pay their own. So, you know, I wouldn't, it's one of those deals where it literally would be someone renting the house as if almost like they owned it, right?

They would have to get their own electric, their own gas. Everything would be in their name. I would probably even have them pay the HOA. Yeah, that's probably, that's a pretty good spread there. Like if your property, it sounds like worth around $200,000-ish, you'd put down 30% and you get a $1,200 mortgage, tenant pays utilities, and HOA. Now you've got, you know, $800 difference there. I think that covers CapEx, vacancy, a little bit of maintenance, those types of things,

and you've got a reasonable cash flow with that. That seems like back of the napkin, a pretty reasonable place to go. And you probably didn't buy your place to optimize for a rental. So you probably could do better than those numbers in some parts of the city. And that's the other thing, you know, trying not to beat myself up as many says I should not. You know, but when I'm talking to younger people, you know, that come into my company, the first thing I tell them is about house hacking. Like, don't, you know, make sure your first property generates you income.

Like, I'm the person preaching that now because I'm thinking back to my 20s, right? And this is my second home that I've owned and just thinking back to how I've made those decisions. and what I wish I could have, you know, done differently. You know, I would have purchased a duplex. I have friends who encouraged getting a roommate. A trigger, I can't quite. And that's okay. You don't have to get a roommate.

But what about a duplex? It's not like you can only buy them when you're 20. You can buy them when you're 38. Yeah, you're already living a townhome. So, you know, it would be no different than living in the current townhome if you bought the, how many townhomes are in your, are attached to yours? Probably close to 70. Oh, okay, 70.

So, yeah, but if you could find a fourplex, for example, there might be one that's very comparable to where you live, and you just happen to live in one of those units. Now, it's a whole other thing there, but I think it's all worth considering in the context of your overall spending, and you're like, hmm, do I really love that $800 every two weeks allowance and still want to save? If so, do I like that more than the car or the way I'm living in my household right now?

Again, you can have any other things that you want. You can't have all the things you want. You're still going to be a multimillionaire by the time you reach traditional retirement age. But if you want that extra stuff, I think that's where you're just going to have to figure out which of these tradeoffs do I want to make and which ones mean more to me. Is it that the house, the car, the discretionary spending, the restaurants, the groceries, you know, you've got a good set of options there. And you just think you're going to cut some of them and keep the ones you really like with those. And that's the real meat of the decision, I think, that you're going to face. and I'm interested to see what you end up choosing. Yeah, I'm definitely just doing this podcast,

which you guys hasn't come at a better time, right? This is, everyone's making their resolutions. I'm looking back on the last year, looking forward to what I want to accomplish in 2021. So I really, you know, the timing for this is definitely perfect for me in terms of the space that I'm in, you know, in terms of making decisions about, you know, what I want to do to go forward.

so that I don't look back on another year and feel like I didn't, you know, reach my goals. And I had a friend that just asked me straight up, like, what is your goal? Like, what are your financial goals? You know, and that was a conversation we were having literally just a few days ago. And they're like, you know,

you've put all this money into your long-term savings, but you talk about wanting, you know, rental properties. Is there a way for you to, you know, go a little bit differently? about what you're doing because I was like, oh, now if I pay the car off, I could put that $700 into a mutual fund. And they're like, but what is your goal? What are you stashing all of this money for retirement for? So they weren't discouraging me, of course, from maxing out the 401K. But they're saying now you're talking about putting even more money into long-term savings beyond that. Is that really wise?

Is that really getting you towards your goal, the goals that you really have? And so I thought that was a really good challenge. Yeah, I think that's smart because you have a good retirement situation. Even if you don't contribute anything, your company's contributing like 15 grand a year's your retirement account, which is more than most. You're going to have well over a million, depending on how the returns go, maybe close to $1.5.2 million by the time you hit traditional retirement age, even if you stop contributing to them. I'm not saying to stop contribute to your retirement accounts because I don't think you'd need to. I think you can have all the liquidity you want and all the rental properties you want while

continuing to max out your 401k, given your level of income. But if you were to do this exercise and decide, I don't want to pay off the car early, I don't want to give up any of my discretionary spending, I don't want to do any of those other things. That's when I think the discussion to stop maxing out the 401k might kick in as long as you were to use that towards these other financial goals. But again, I just don't think you need to go there, given your overall situation. Yeah, so I'm definitely looking forward to implementing that using my notebook and writing down my expenses, allowing my friends who've already volunteered to hold me accountable, allowing them to hold me accountable, and looking at the car situation, taking that seriously into account and just kind of really going into a new year with a different outlook on how I spend. I think that's going to be huge. I think once you start writing it down on the notebook, every time you come in the house,

it's going to be just astonishing because I was in that same position, you know, oh, I'm not paying attention to my spending. I know I'm frugal. Well, yeah, you're only frugal if you're buying the stuff you need, not like all the other extra stuff that I was buying. So once I started writing it down, I don't even think I got through the whole. first month before I was like, oh, I got to make this a game now. How little can I spend? And, you know, that's a fun game. It's fun for us, money dorks, but it's a fun game to be, how little can I spend? And every time you don't spend all of your $400, take that cash and put it into a savings account. And then the next week, you only have $400. And you come in at $382. Take that and put it in the

savings account. And then the next week you'll be like, oh, I'm going to come in under 350. And then the next week, I'm going to come in under 300. And, you know, the pantry is going to help a lot. Having your own little personal Tracy's Target right at home is going to be super helpful because you don't go in and grab just one thing that turns into 20. And that is, I don't know if, I'm sure everybody listening can understand that because you can't come out with Target from Target with one thing. You can't. It's like a lot.

I do. I want to shut up, Scott. See, yeah, guys, you have to do that. It's impossible. And I've even, like, just psychologically, like, the little things, the triggers, I've said I was going to delete the Amazon and Target apps off my phone. Oh, yeah, do that. Delete them off because the few clicks of a button just make it so insanely easy.

So just little things like that. I make it, you know, more difficult for myself to be able to access those. And then I like the idea of going down to one card because, you know, spreading it out over multiple cards allows it to get out of hand very quickly. It does. It really does. And, you know, as you start to pay attention to where your spending is going, it gets easier to, it doesn't feel like such a burden.

It doesn't feel like such a chore to, you know, oh, I can't do anything fun. Then it does get easier. But I think we need to recap that you're doing awesome. You really are doing fantastic. And I don't remember who said this, but I thought it was so powerful. Don't compare where you are to where somebody else is because they started at a different time. They've had different circumstances. They've made different choices.

Start where you are. Compare yourself to Tracy last month. Tracy last month spent a lot of money. Tracy this month didn't spend so much. Yay for Tracy. Tracy next month is going to spend less than Tracy this month spent and on and on and on. And sometimes Tracy next month does spend more because she has to replenish her pantry or whatever. But it's a more intelligent, thoughtful spending process because now you're paying attention.

And I am going to just give a big confession. I haven't tracked my spending in months and it's getting out of hand. So starting January 1, we are back to the spending tracker. And I don't do the notebook anymore. I do the app, but it's the personalized app from the Waffles on Wednesday couple. Ah, okay. But that's right on my home screen. And anytime I'm like at the cash register, I'm like, I know I know I'm taking up time,

but I'm typing it in right then and there because I'll forget. So, and then I know I have to share it with my husband, and I don't want him to ask me why I spent so much money. So I just don't spend it. That's helpful. To recap kind of all the things we discussed today, like, again, you're doing fantastic. You've got a strong net worth, a really good retirement account situation. You've automated the huge parts of building wealth.

And that's where you've been really, really successful with those types of things. Your income's great. You've got a bonus, which you do not depend on for your spending in those types of things. You've got an emergency reserve house, cars almost paid off your year out from that. I mean, things are going really well overall. Asset allocation, I don't think is really a fundamental issue for you. You have one tactical choice around the car payment, those things, a $500. choice, which just depends on how soon you need access to that liquidity for other investing

purposes. But again, the fundamental problem here, I think, is that you've got a good situation, but you have no, you don't have the freedom over the next 15, 20 years that you'd like to have, that I think you can have by building wealth intentionally, in addition to that wealth you have in your retirement accounts and that you're building automatically month by month in your home equity. And for that, your spending is going to be the key challenge, I think. And it's going to be how do you get that under control, really make some choices that automate or make it difficult for you to spend outside of those boundaries that you place? And then maybe I think also my last point here would be thinking about some sort of accountability mechanism. It could be the tracking of your

spending, could be a mastermind group with some of those ladies that you know. It could be a number of things. But I think that would be really helpful for that. And there's no reason why you can't be sitting here a year or two from now, accumulating three, four, five grand a month on a very regular basis outside of your retirement accounts after an investment or two, a raise, perhaps in a year, in a years ahead, and then a, um, these controls and you're spending with that. Yeah, I totally agree. I truly appreciate everything, um, that you guys have shared with me. I am walking away with lots of ideas and optimistic about the new year. Yay.

Well, that's very exciting. Thank you so much for coming on and sharing all this stuff. I know it's very personal and a lot of detail here, but we really appreciate it. And I think you're going to help a lot of people who get to hear your story and all the things you're going through right now. Yes. Well, thank you guys again so much for the time. I appreciate it. Tracy, thank you for your time.

And to make your real estate location choice a little easier, I am going to send you a copy of our long-distance real estate investing book to see if that's interesting to you or see if you want to stay. more close to home where you are right now. Oh, thank you. Oh, you're welcome. You're welcome. Yeah, that would be awesome. Do you have a joke for us? I do not.

That's okay. Scott does. What do you call a Christmas wreath covered in $100 bills? Christmas wreath covered in a hundred. Something about the Benjamin's? I don't know. Close.

Aretha Franklin's? Who gets, Who gets credit for that in the money group? I stole this from the money channel and somebody posted it and it got like a bajillion likes. I told him I would use it on the podcast. So who was it?

And I have to find that in the group. It was fantastic. Thank you, whoever that was. We'll mention you it shortly. But Tracy, thank you so much for coming on the show and sharing your story and all this with us. We really enjoyed it.

And we hope that you have a great and very successful 2021. You guys too. Thank you so much. Happy New Year. Happy New Year, Tracy. Thank you for coming again and we'll talk to you soon. All right.

Bye. Scott, that was Tracy from Pittsburgh. What did you think of her story? You know, I think it's a really good example of this kind of phenomena that happens to middle class America where things look like they're going really well. We're making a good income, got the house. got the car, the retirement account is huge, but yet I just do not feel freedom. I do not feel like I've got options, freedom, liquidity, those types of things. And, you know, I think it's,

I think a lot of people are in a similar situation where the vast, vast majority, I would say north of 90%, 95% of her net worth is in just her retirement accounts and then a little bit of home equity. Some people will have much more in home equity if they bought in like a place that appreciated a lot for a while over the last five years. and a little bit less in retirement accounts. But that story, I think, is repeated all across middle class America. And I think it's a really big, frustrating point for the country as a whole. I think it's a huge thing that's going on in our society these days.

And I think the root cause of that is just a lack of intentionality about really attempting over a long period of time to build wealth outside of those two places that gives you those options. And that is what I heard as her overarching goal or desire today was to really reorienting, her finances around that. And I think we've got a clear path to do so. It just really comes down to being intentional with every dollar that's coming into our bank account after tax and making sure that there's plenty left over on a monthly basis. And then let a couple years go by with a three, four thousand dollar savings rate and a couple of investments with that cash. And all of a sudden,

the world begins to look a lot different, I think. I peaked at realtor.com while we were talking to Tracy and I'm seeing houses that are 100,000, 150,000, 200,000 in Pittsburgh. I don't know the market. I'm sure not all of those are in, you know, neighborhoods that she wants to invest in. But if she can save $5,000 a month, which is totally attainable for her, I think when she rains in the spending a little bit, she could be, that's $60,000 a year. She can buy a new rental house every single year. And then tagging off of what Rich Carrey.

said on episode 155, she could start paying those off and then her rental properties buy her more rental properties. He has 20 rental properties in Alabama that are all paid off and he's having a great time with it. And he's got enough income from those rental properties that he doesn't need to work anymore. He's retired from the military so he also has his pension. But I see huge things for Tracy. Absolutely. We didn't really talk about the longer term stuff here. But, you know, because our short-term goal, I think, is really short to medium-term, is really to build more wealth in general outside of those retirement accounts and have some of these options available. But long-term, we just talked to the mad scientist. And he had some

great points about how, you know, look, if you want to retire early, traditional retirement is part of early retirement. And she's got all that money in the 401k. If she would really begin backing into some of these things and looking at some of those more advanced things that we talked about with the mad scientist, she may be realized that she's really not that far away from being able to retire in a general sense with the 700,000 or so in the retirement account and some of these Roth conversion ladders and all these other types of things, the game she could play. There could be some really good options in her future there. And I think it just comes down to now she's got to really focus in buckling down and building

that wealth outside of those retirement accounts to bridge that gap between today or whenever if she were to make that a goal and want to retire early and then try. traditional retirement age. Another thing I think that's going to be really critical to her achieving that goal is that accountability piece. And it's something we haven't really thought of or considered here. But I'd encourage you if you're interested in something like that or I feel like that would be helpful to go on the Bigger Pockets Money Facebook group.

And we will start a thread when this episode releases, which I believe is January 15th. And we'll go ahead and have a little discussion there and see if anybody else is interested in creating a little bit of an accountability group. It could be a little virtual one with a couple of people across the country. And we'll see if that works. and if people like them and they're helpful. I love that, Scott. And, you know, she said that she's got friends who have offered in the past.

And she wasn't ready in the past. Now she is at a point in her life where she's ready and she wants to do this. And I think it's so important to note that if you are ready to do it, that's the best time to start. Don't listen to this episode and think, oh, yeah, I should probably do that. I guess I'll do it. If you're ready to do it, you're going to have so much more success than when you feel obligated to do it. And I am so excited for Tracy because I know she is just going to kill it. She's going to sit down with her girlfriends and say, okay, Mindy and Scott told me, I have to do this and I'm ready to do it.

And I need an account of, I need you to keep me accountable. I only want to spend this much money this month. And they will help her out. And I think it's so fortunate. that she has those people in her life. But yeah, like you said, if you don't have those people in your life, because it's kind of hard to find people who have the same money values that you do or who will be willing to talk about it. We've got a whole Facebook group full of the people who have the same money values that you do or similar and would love to talk about it. They don't have anybody

in their life either. They can't wait to talk more about it. Yep, absolutely. So you can find that group at Facebook.com slash groups slash BP money. And jump in and say hi, tag Scott, say, give him a really terrible joke. He loves those. Also, this is our third Finance Friday. We have actually recorded several more in advance. And we are fairly male heavy on these episodes. Not that I don't love the men, but ladies, please reach out and let us review your finances too. I don't want you to think that you're not welcome in the finance Friday episodes. We love the ladies too. Does that sound weird? Absolutely. No, I think the key is for these to be as helpful as possible and for us to learn as many

lessons as possible to have all different types of folks. And I would say in general, our applicants have been a little towards the higher end of the higher income range. You know, maybe a lot of applicants, for example, with north of $100,000 in earnings and those types of things. And I think that it would be great to have some folks with maybe a little less earnings. It'd be great to have some more folks with families and the challenges that those present in terms of having the additional expenses and maybe a little bit less free time. And I think that there's a lot of to be learned from more diversity in the finance reviews. That said, we've had a wonderful time doing this. And I think we've learned a lot from the

folks that we have had on the show. I have learned so much. There's an episode coming up where I suggest that they stop contributing to their 401K. I suggest that. That's not me, but the situation for them makes it a really intriguing possibility, and I hope that they look into it. But I am opening my mind and opening my horizons to different possibilities, and it's helping me in my finances too. Like I said, I have not actually been checking my spending lately, and that's gotten me into some trouble. And I host a podcast every week about money. So that is our January resolution to start tracking our spending again. And it's just really helpful.

So I am practicing what I am preaching. Wonderful. Okay, Scott, should we get out of here? Let's do it. From episode 162 of the Bigger Pockets Money podcast, he is Scott Trench. I am Indy Jensen saying we can't stay, Blue Jay.