BiggerPockets Money Podcast - 185: “I DON’T Want to Retire Early” with Investing Expert Barbara Friedberg

Episode Date: April 5, 2021

Barbara Friedburg wasn’t always the savvy investor and saver that many people know her as, but her background helped get her there. Born to parents of the great depression, Barbara had the traits of frugality and modesty instilled into her from a young age. Money was an open subject of discussion in Barbara’s household, unlike most households today. Her parents taught her to value money, not waste it, and be smart when you spend. Barbara’s innate financial intelligence was clearly shown when she met her husband. Within two weeks of them getting together, Barbara had already taken over her future husband’s finances and got his money into a retirement account. This led to them having a very financially healthy relationship, never spending more than they needed to, and putting a substantial amount of their income into savings and 401(k) accounts. Barbara then went on to become a financial planner, investor, consultant, and author. In a time where the market is so overvalued, she advises young people to be smart with their income and understand that wealth is built in the long-term, not through quick gambles. Save your money, invest it consistently, and get off the hedonic treadmill. “Don’t covet your neighbor’s BMW” is what she told us! Barbara also gives us an inside look into her current investments, and why she heavily favors passive index funds over single stock picks. She goes into short, medium, and long-term money, and the uses for each. For young people who haven’t gotten a grip on finances yet, this is a great episode to hear from someone who has done it successfully for decades! In This Episode We Cover  Making sure that money is a topic often discussed in your family  Knowing the value of money and fighting back the urge to spend frivolously Saving a large amount of your income whenever possible Why Barbara doesn’t believe the FIRE Movement is attainable by most Why You HAVE to be diversified in order to succeed What to do with your short, medium, and long-term money And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Scott's Instagram Mindy's Twitter Hacking Hedonic Adaptation to Get Way More For Your Money Free Investing Resources  Check the full show notes here: https://www.biggerpockets.com/moneyshow185 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast, show number 185, where we interview Barbara Friedberg and get investment advice from a rock star investor. We went actually to a financial planner at that time, and he said to me, I cannot believe how much you are saving. And I thought, you know, this is normal. So I have a lot of, I just need to save, you know, to me, money is not what you can buy with it. Money. Money. is security. And if you have it, you feel more secure than not. Hello, hello, hello. My name is Mindy Jensen. And with me, as always, is my suitcases full of cash co-host, Scott Trench. Do you think that these creative intros add to the show, Mindy,

or do you think that they're just baggage? I think they add to them. Oh, great. Scott and I are here to make financial independence less scary, less just for somebody else. We're here to introduce you to every money story because we truly believe that financial freedom is attainable for everyone, no matter when or where you're starting. That's right. 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 just simply build wealth over time and find that security you're looking for. We'll help you reach your financial goals and get money out of the way so that you can launch yourself towards those dreams. Scott, I am so excited to bring in Barb today. She is an absolute delight. I have known her

for several years through FinCon. And I talk to her frequently as a panelist on a podcast called Money Tree Podcast. And she's just a delightful person to talk to. She's so smart. She even says it during the show today. She's like, I'm a smart woman. She is smart. She's very smart.

And she's very clever. And it's just a fun trip down her story, starting in a position of unenviable poverty and ending up in a position where she has maybe not enough to her, but she definitely has enough for most. I really enjoyed the interview with Barb today. She's got a very strong outlook on money and a really strong journey. Fundamentals consistently applied over a very long period of time and applied with extreme intelligence over the course of her investing and wealth building journey here over a very long period of time. My favorite part of today's interview was when we said, Hey, debt yields are at all-time lows, right? So you can't invest in bonds and expect to get any

income. The stock market is at all-time highs with respect to PE ratios, right? It's, or crazy highs relative to PE ratios. So you can't get any return out of the stock market. Real estate is just through the roof because interest rates are so low and prices are soaring across the country. And inflation is looming on the horizon, so I can't sit on any cash. What the heck kind of option is that leave you with? And I think she's got a great response to that. Yeah, she is not just off the cuff. She's very smart and thinks about her answers. And she's just got a lifelong knowledge base of information.

And there's no surprises in this. She's not going to say you need to win the lottery. In fact, over her shoulder, there's a book called How to Get Rich without winning the lottery. And she's just all about starting early, making consistent contributions to your retirement accounts, saving money, spend less than you earn. Her comment about being happy with less, when you're happy with less, you will be happy with less. When you want more, you'll never be happy. And that's just really profound. And at the same time, like, just it's common sense. And everything about this episode is fabulous and fun. And you are going to love Barb as much as I do.

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. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances

this tax season and get 50% off your Monarch subscription with the code Pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code Pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code Pockets. I love Matt, said no one ever.

Nobody starts a business thinking, you know what would make this? more fun, calculating quarterly estimated taxes. But somehow every small business owner ends up doing it. Your dreams of creating, selling, and growing get replaced by late nights chasing receipts, juggling invoices, and wondering if that bad sushi lunch with Scott counts as a write-off. Change all that with Found. Found is a business banking platform built to take the pain out of managing money. It automatically tracks expenses, organizes invoices, and even preps you for tax season without you doing the heavy lifting. You can set aside money for business goals, control spending with virtual cards, and find tax write-offs you didn't even know existed. It saves time,

money and probably a few years of life expectancy. Found has over 30,000 five-star reviews from owners 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. Found 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 Found. 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 Leaner 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. Barb Friedberg, welcome to the Bigger Pockets Money podcast.

I am so excited to talk to you today. Thank you so much for having me, Mindy, and Scott. I am ready to talk money, investing, and the secrets behind my story. Ooh, well, let's just jump right into it, Barb. Where does your journey with money begin? I got to say it begins when I was born because it starts with my mom and dad, who are my greatest inspiration. My parents were born in the Depression.

My father was born in abject poverty. He started working when he was age 10, selling newspapers on the corner. He got his first bike by going as a child to a police auction by himself to bid on a bike. So my mom grew up middle-ish class, but the tone within my family was always to be very smart with your money. It was you don't waste money. It's an important commodity. And it's really something that you value and you talk about. So that's the overall view that I grew up with.

Okay, everything that you said was not surprising until you got to the part that said you talk about it. That is fantastic because I grew up in a similar-ish story. I'm a grandchild of the Depression, and my parents never talked about money. I mean, they talked, I think one time my mom showed me how to balance a checkbook or something, but that's not anything like helpful in real life. That's not going to show you. I mean, they had money. So, of course, it balances.

Like, when I balance my first checkbook, I'm like, look at all those negatives. That's not good. So you guys talked about it. How old were you when you first remembered them talking about money? I don't remember ever. not talking about money. It was always within the conversation and a little side secret when I was a rebellious teenager, I thought they are so materialistic. Oh my gosh, do they think about anything other than money? And, you know, a few years later, here I am. What do I talk about? So, you know,

don't mock your parents because you're going to turn out like them. So true, so true. So what does your financial position look like graduating high school and moving into college? Well, I always worked. So working was embedded. And it wasn't something that came from the outside. I had the inner drive that I wanted to work. I wanted to be an adult.

I wanted to be productive. So graduating high school, I had actually inherited from a single aunt. I think it was about $7,000, which to me seemed like, you know, a ton of money. And I had saved up some money from working and from gifts and that kind of thing. So I had a start. You know, my bank balance wasn't negative. And I went to college at a time at a public university. where you didn't need debt.

So it's like it was another world than I know a lot of people are experiencing today. So I used part of my inheritance to help me pay for college. My parents helped pay for college. Again, I worked part-time in the summers and always had a savings mentality. You know, yeah, I craved what everyone else had, and I had my mind that when I had money,

I was going to get the fancy car and the fancy house, and blah, blah, blah. And lo and behold, when I had money, it's like, I'm not wasting it on that stuff. So, yeah, that was me when I graduated high school and went into college. And so what was the position upon graduating college? What did you get your degree in? And how did you kind of start in the workplace? I graduated college with a degree in economics, and I graduated during a huge recession, not unlike the recession of the, like, recent 2000. And so there were no job. So I was like, oh my God. So I took a secretarial job. And I worked for, you know, a moderate salary. Then I transitioned and I said, I'm going to get my parents had a real estate business. So they, they were actually, my dad had a lot of different businesses. But at the time that I graduated from college, he had a brokerage company. And he also had what is known. today is to fix it and flip it.

You know, we didn't have those names before, but he bought dilapidated properties, fixed them up, and either rented them out or resold them. So I said, I'll get my real estate license. So I started working in real estate and selling real estate, and that was my love. And, you know, kind of started making my way in the world. Mindy, you look like you have a huge question. I have a huge comment. Okay.

So you said I went to school at a time where student loan debt, you didn't have to have student loan debt to graduate, which I love. I also went to school during that time. And you said I worked summers. And did you say you worked during the school year two part time? Yes, most of the time, not 100%. But I always get a scheme. You know, I was always looking for an angle where I could make money. So at one time, I would, I made, I loved crafts and sewing, so I made hippie shirts and sold them to my friends.

I worked as a tutor, you know, so I always had some sort of angle going on. So yeah, I worked a lot during school as well, not full time. Okay, I just want to point out for people who are listening, who have kids who aren't talking to their kids about money. Barb's parents talk to her about money all the time. What did you say? I don't ever remember not talking about money. And then you didn't need to go into debt to graduate from college. You still work to pay and get money.

And you always had a scheme. I would love to see some of your hippie shirts because I have never met a person that I would consider less a hippie than Barb Friedberg. Oh, my gosh. I know. I've changed a lot. You're so classy. You're a really classy woman, and I don't equate hippies with class. I don't know.

That's a horrible thing to say, but come on. You know, didn't they have signs in the 60s? No hippies allowed? Yeah, pretty much. You know, but whatever, yeah. What I'm hearing from your story here is, hey, like, this financial discipline was instilled early and often, and there's a, you know, there's a $7,000 inheritance. college was paid for with that hard work and some assistance for mom and dad. And then those habits

kind of continued straight on through after graduation where you could find work and always, you know, applying a side hustle. And so what I'm curious is about is do you have any sense of like the percentage of your income that you were able to save during those first few years out of college? Yes. And how you kind of began approaching the wealth building game with that? Yes. And I want to share a story. because in my mid-20s, I met my husband, my current husband, and within two weeks, I had taken over his finances. So I know this is not typical, but I was like, you don't have an IRA account. Come on, get with it. We need to open an IRA. I will be managing your money. He said, let's go shopping

at, you know, one of the major department stores. I said, you're not going to the outlet mall? come on he's like i don't shop at the outlet mall i'm like well you're gonna shop at the outlet mall now and so you guys didn't have the money talk before no we do you had it after yes we that's that is a good point scott he paid full price for his car so i'm like i know and you're still married him you're still married to him you're Oh, he's such a wonderful guy. He is the best ever. I'm not kidding. This is one way to go about the money talk is you say, all right, we're married now and I got the money. Yes, I'm the boss. You shop here now. That's exactly how it goes.

And so how much did we save? I always saved more than I could afford, literally. So I was the mass, we were the master. of the hack. You know, how do you get a lot for a little? So actually, when, after we had been married for a couple of years, my husband wanted to go back to graduate school. And he has since gotten, you know, he got his Ph.D. in psychology. He's been a child psychologist for many, many years. But at the time, his graduate school, we had to come out to California, which was a really, really expensive place. and it was the tuition was very high in our minds. I'm not going to tell you how much it is because you're going to say today, that's nothing. So I got actually a really, really good job.

I had gotten my master's degree in counseling before that and was a career counselor for a couple of years. Got a great job at San Diego State University. Contributed the maximum amount allowable by law to my 401K. So we went actually to a financial planner at that time, and he said to me, I cannot believe how much you are saving. And I thought, you know, this is normal. So I have a lot of, I just need to save. You know, to me, money is not what you can buy with it. Money is security.

And if you have it, you feel more secure than not. So, you know, range saving from 2015 to 40% of our income pretty much always. You know, when we didn't have a lot of money, you know, it was more in the 15 range. And sometimes we would dip a little bit into our savings to live just so we could fund that IRA or the 401K. Okay, great. So you have an X amount of months in your emergency reserve or savings account you're referring to and you're saying, hey, great, I will forego keeping that at the level that I want in order to fund my IRAs or other investment options. Is that right? Yeah, yeah. But I am so conservative by nature that we always had enough savings that would last us, you know, should an emergency. arrive, arise. How did you think about that amount? Did you think about that in terms of months of spending? Or did you think about that as a dollar sum? Or how did you think about your- I just always thought,

I need more money in my savings, you know, so it wasn't like, at that time, things, personal finance wasn't the industry that it is today. And there weren't all these rules. And so you didn't think, how many months do I need? It's like, I need a lot of money in my savings because I never know what's going to happen. So your savings account just continuously grew. for a long number of years and just continue to add to it while also adding to your IRA. Yes. Did you invest anything else while you're doing this? When my husband got out of graduate school, we were both working, you know, then we could

start investing. And we had a brokerage account. And so we've always, you know, probably since my mid-20, I've always had a brokerage account. So stocks, bonds, real estate, mutual funds, yeah, we've, we've, we've, we've, we've, been investing in everything for many, many, many years. What I'm hearing is, again, we have a good savings rate. We've got a good approach with money. It's continuously piling up more.

There's a lot more cash coming in than going out, and we're building that wealth and investing it across, we're deploying that wealth across a continuously growing savings account, an IRA and a brokerage account where we're investing in stocks, bonds, and those types of things. Is that right? Yes. Was there an intent, for example, to retire early?

or was there an intent to start a business or have some sort of outcome with the wealth that you were building other than, you know, just continuing to build the wealth? Like, what was the, did that just kind of continue for a while and add infinitum? Or was there like a, was there an evolution of thought or how did that, I don't know, I guess. This is an embarrassing question. This is so embarrassing. Do not tell anyone this, okay? between the three of us. I have like really, really modest tastes, okay?

So I'm not looking for a second home. I don't want to retire. It's all, look, I'm not saying I don't spend money on things. There are things that are important that I want. You know, we've always owned our own home. We travel a fair amount. So there are things that we price. prioritized to spend her money on. And, you know, when we were raising our child, we spent a lot of money on her.

You know, she had sports, and we really prioritized that. So those were the priorities. So we had to have money for those things. You know, we had to be able to afford to travel to visit our parents. We had to take a vacation every year. So, but my husband also did consulting. So we'd pair, his consulting jobs, you know, at different places with a vacation. So we were always savvy. But when you talk about a goal, I don't want to retire early. I don't want a second home. One of my financial advisor friends once said, the end amount of money that you have, you always want about 30% more. And I thought that was so crazy because no matter what level you, you reach, you don't feel like it's enough. And I kind of resonate with that. I've got enough. I don't,

you know, foresee needing more. But there's always in your mind, well, it wouldn't hurt to have a little more because you never know what's going to happen. So in terms of these ultimate goals, I know the fire movement, excuse me here. I know I'm going to get a lot of hate mail for this. I think that's stupid and it's indulgent because really on the majority, most of the people that can do that are people that are like earning 150 and $200,000 a year and, you know, have fancy jobs or live in places that are really, really cheap. So it was never, can I retire early, you know, so. Well, let me ask you this because I think this is great. I think that's a great perspective. I completely respect it. Let's just get inside the minds of someone listening, right,

who's starting out. Who now hates me. I'm listening to this. I'm 20 or 30 or be 40 with that, and I'm looking to build wealth and get really excited about that stuff. A big motivator, a why, like the obsession with personal finance that I personally kind of went through was that idea of having the option to retire early. I am clearly not retired. Love my job. Mindy is the same way, right? Or so she tells me. And so, you know, we're, like, that's, that's the driver or the motivation behind that. Like, what I, what I'm interested in learning is, is, and that's taken for granted, I think, by a lot of folks, perhaps me and Mindy included in some cases on the personal finance, like, why you're listening to these shows and those kinds of things. But it seems like there's another motivation that's moving you. And how can we share what that motivation is or unpack it a little bit and, and access more people with this?

because it is a good outcome to just want to work for your entire adult life and be productive and amass a substantial net worth. So you have enough should there be a problem or should you need it with those types of things. But I guess I'm just trying to get into and unpacking that motivation and how that can fire somebody up in addition to the fire movement. Well, first of all, I want to say something. I want to own up to something. I am privileged, okay? a lot of people have not had the good fortune that I have.

I recognize that and I appreciate that. You know, I had parents that trained me well. I didn't know people that took on a lot of debt. I've had a lot of good luck. And I think luck is a part of this journey. So I don't want to say, oh, I did it all and I'm so great. No, I'm not. I had a lot of help along the way.

I had a lot of good fortune. I have a husband who's wonderful, who supports me, who also has a good job. So I just want to put that out there. And so I have the luxury of being able to work at something I love. And I know a lot of people don't have that luxury. So I think I might have a different mindset if I had to work at something that I didn't love. and everyone cannot do that. So my internal motivation is a lot of the fact that I'm doing things that I love.

And I know there's this common conversation that you find your passion and you'll never work a day in your life, blah, blah, blah. Well, that sounds really wonderful. But everyone can't do that. And some people just have to work at a job that they may not love. to put food on the table. I love that. I want to go back to the comment you made a couple of minutes ago. You said the fire movement is indulgent,

and people who are part of it have fancy high-paying jobs. And I think at the very beginning of that, that was really true. You've got all of these software engineers who are making $250,000 while being naturally frugal. My husband is this way. He was making a huge salary. we spend like $30,000 or $40,000 a year. We just don't spend a lot of money.

And that's with, you know, buying good beer instead of garbage beer and, you know, going on vacations, but we go on vacations with miles and points instead of dollars. But still, we were part of this community because he had a job that he hated. He was writing software for the VA hospitals. If you need a unit of blood, he wrote the software that makes sure that the blood you're getting is compatible with your body, you can die if you get the wrong kind of blood. So there's some stress involved in that. Wow.

At one day, he was like doing some work and there was a bug. And he's like, oh, my God, I could kill somebody with this bug. I'm so freaking out. And then it turns out there wasn't a bug. But for like five days, he couldn't eat. He couldn't sleep. He was so stressed out. And he's like, I can't live like this anymore.

I got to get out of this. I got to, you know, do something. And we had been just like you. We both grew up without a ton of money. He grew up. His dad was always, he was a union electrician in Chicago, so he would work through the summer and then get laid off in the winter when there was no jobs every single year.

So he grew up financially insecure, I would say, is the right way to phrase that. And you gravitate to this fire movement because you can become financially independent and then leave the job that you hate. I think a lot of people focus on the leave the job that you hate instead of the being financially independent so you have options. You said that you wanted more money because money's security. And it is because when I have a big fat bank account and my boss tells me I got to work on Sunday every day for the next year, I can tell him, no, I'm not going to do that. And if he says, well, if you don't, you're fired, I can say, well, see you later and be okay with that. So having the financial security, I think, is something that should be more focused on than the retire early

part. I also think that a lot of your background, you said your father was born into abject poverty, I don't really think people, like millennials and people who are the younger generations realize just how awful the depression was. I mean, I remember going through my grandmother's things when she passed away, and I'm like, why did she save this? Why did she save that? She saved it because you never know when you're going to be able to get that again. Like they save everything. The elastic from underpants. Like, oh, there's holes in the underpants.

I'll cut out the elastic and be able to use that on something else. And now you've got people who throw away TVs because there's a little line down the middle. So it's the mindset can be very different. And I think that growing up without having a lot of money really can mess with your head. And I think there's really two ways to handle that when you grow up without a lot of money, you are either hoarding money, which is a lot of the people in the fire community, or you are spending it like you can't make it fast enough because you never had anything before, so now you have to experience all the things.

And I think that you obviously went to the former side, which is how I did that too. You know, we don't spend money. I would love a second home, but I don't live in California. Do you live in California? I do. Yeah. So you live in California, that's kind of a beautiful place to live, you know? Yeah, I don't need another home.

Yeah. Yeah. That is what everybody has their second home. Right. So, you know, I just, I think that that is, there's a lot of things to consider and not just the retire early part. I really, really want everybody to be financially independent so they can make decisions that, you know, are smart.

And, you know, then you don't have to work the job you hate. You can work the job you love, which is what I do. Very good point. Very well put. During your journey, it seems like there was no, there was no, there was no necessarily. end goal with the wealth accumulation. It seemed more like a process and making sure that there was more and more security. Is that right?

Yes. Yes. Absolutely. And what I'm interested in is I understand you're a business owner at this point. Is that also right? Mm-hmm. Okay. Yeah.

So could you walk us through maybe how your financial position opened up kind of career and business options for you throughout your journey? Like perhaps was the decision to maybe go into business for yourself? related to a feeling of security with some of that, those financials are, or is there any, is there any commentary around that that maybe is a part of your story? Well, I got my MBA when I was older. Okay. So I've always had a passion for business. And I kind of fell into it because after I got my MBA, I had the option. I can go work for corporation and, you know, I had already been an investment portfolio manager before I got my MBA

and got my MBA during that time. And then there was a chance why I could do another job or something like that or I could transition into something else. But I really, it just didn't, I didn't find anything that I really wanted to do. I didn't want to work a 60 hour a week. So I kind of, you know, cobbled together started writing online. And from that initial blog, which I started, which was Barbara Friedberg, personal finance, I still have that. A business has grown. So I've written books, both self and other published. I've started another website, RoboAdvisor Pros, where I cover all the robo-advisor field. Then companies have contacted me because they want me to consult on the robo-advisor industry. I've done a lot of freelance writing because I like to write about investing

for major publications. So I didn't say, oh, I'm going to start a business. It was kind of something that evolved. Okay, got it. So this was kind of like a side hustle while working your full-time job it started as and then kind of evolved into it. And then kind of transition left my full-time job. and turned into something else. So you are part of the fire movement. Right. You were financially independent. You retired early from that other job and now you have your own job.

Okay, except the early part is kind of subjective. You know, I know I look 25, but really I'm not. Same. I have that same problem. Yes, it is a problem. So, and I, you know, But I do think that's important to note. When you were starting investing, when you were saving in your savings account, I remember

double-digit interest rates for your own personal investments as well as for, you know, when you're getting a mortgage. My entire college was funded by my parents buying me savings bonds as a kid. Yes. And then in second grade, I had to sit down and sign this stack, like literally this much. sign this stack of savings bonds with my name on it, not get any money. And then my dad put it into a some sort of, oh, a 10-year CD at 15% interest. Yes, yes, yes.

Those were the interest rates in the 80s. Yeah. And then at the end of the time that I graduated high school in 1990, and then they became, the bond was up and the guys like, hey, dad, do you want to do you want to do you want to extend this? He's like, can you give me another 15%? And they're like, no. Yeah, it's a, it's a total, it's crazy that interest rates were in the double digits. A 6% mortgage used to be like so cheap. So we're in a totally different world today than, you know, a generation ago. What kind of advice would you say for,

what you would have for folks looking to begin building wealth or repeating kind of your successes that you've had over your career. And again, it sounds like it's based on frugality, bringing in, spending less than you bring in, and investing very consistently over a long period of time with a security emphasis and a cash position, a strong cash position, a financial fortress that you built early and maintained in perpetuity with that. But like, what, what advice would you have for folks that are looking to repeat that story? think the first place to start is with your mind because if you want less, you can become happier with less. You don't have to covet your neighbor's BMW or Tesla. And you can be happy driving a

20-year-old car and feel like, I don't need to impress anyone. So first you have to know what's important to you. And you have to figure out, okay, I'll spend on what's important to me, but not what's important to other people. And that's where you start, because as long as you're coveting more and more and more and more and more, you will spend more and more and more and, and, you know, avoid really expensive hobbies, you know. Don't buy more house than you can afford. Don't buy a fancy car unless you can afford it and meet your savings in, best in goals. So that's where I would start. I love it. The mindset is so important. And, you know, one of the concepts you have that brings to mind is the idea of hedonic adaptation,

which is a big point that Mr. Money Mustache likes to make and something that I read on his blog a while back. But it's like, hey, regardless of what you've got, if you can learn to be happy with what you've got, you're going to be happy. If you're always wanting more, you can buy more and you're going to be just as unhappy as you are today within two weeks after buying that new car or the bigger house or the fancy doodat or whatever. There is no end to the hedonic treadmill, which is something that you can Google and learn about if you're listening on that. Well, we'll put a link to that in the show notes. But yeah, that is so, that concept sums it up, Scott. That is just perfect.

Yeah. And I think that there's a lot more time and optionality to pursue. happiness once you're in a position of security, whatever that means to you. So for some people that security, it sounds like you've reached that point of security, Barb, and it sounds like some folks might reach that when they hit the 4% rule for fire, or they might reach it long after that or even before that, depending on how that has to go. And so I think that's a great place to be, because the pursuit of happiness probably seems more attainable from that position. Well, and I want to throw something else out is because on paper I'm secure, but

psychologically, there's always anxiety. You know, you always worry. Well, you can't control the future. And particularly during this past year of COVID, you learn there's a lot you cannot control. And so that's where you have to get back to controlling your mind because there's so many factors that are uncontrollable. And the security is great. But you also have to train yourself to realize that you've got to be able to accept uncertainty in your life. Barb, what gives you anxiety right now about, with regards to finance? You know, I guess the biggest thing that scares me is having some sort of medical emergency. That's something or some, I think the medical emergency is the most because that is something

that can rip through your finances like mad. and you have insurance, and, you know, we have long-term care policy as well, but it's not 100%. So that's the one thing that is outside my control. 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. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking.

You can see your budgets, debt pay-off, savings goals, and net worth all in one place. every decision actually moves in a needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at monarch.com code pockets. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast?

Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed's sponsor jobs helps you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored posts. The best part? No monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through

Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash bigger pockets. Just go to Indeed.com slash bigger pockets right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash bigger pockets. Terms and conditions apply. Hiring, Indeed is all you need. When you want more, start your business with Northwest Registered Agent and get access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest today. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years.

They're the largest registered agent and LLC service in the U.S. with over 1,500 corporate guides who are real people who know your local laws and can help you and your business every step of the way. Northwest makes life easy for business owners. They don't just help you form your business. They give you the free tools you need after you form it, like operating agreements, meeting minutes, and thousands of how-to guides that explain the complicated ins and outs of running a business.

And with Northwest, privacy is automatic. They never sell your data. And all services are handled in-house because, privacy by default is their pledge to all customers. Visit northwest registeredagent.com slash money-free and start building something amazing. Get more with Northwest Registered Agent at Northwest Registered Agent.com slash money free. Marvel Television's Wonder Man, an eight-episode series, now streaming on Disney Plus. A superhero remake. Not exactly what we'd expect from an Oscar winning director.

Action! Simon Williams, audition for Wonder Man. I'm going to need you to sign this Assuming you don't have superpowers I'll never work again if anyone Farn up My lips are sealed Marvel Television's Wonder Man All eight episodes now streaming

Only on Disney Plus Going back to your journey a little bit here How important were any Outsize investment winners For you on your both-blooding journey Do you have any that you can recall Or talk about directionally? I do

I do. And I think that's a super question, Scott, because the one thing I like to put out there when people talk about investing is you have to be diversified because every investor knows that not every investment is going to be a home run. And you can kind of expect that you'll have some outside winners and you will have some horrible losers. and then the rest, if they kind of stay in the middle, you're going to come out ahead. So one of my biggest winners was investing in Oracle. I don't even remember when I first invested in it. It might have been in the 90s. And that was before I switched to a more passive index fund investment approach. And oh gosh, it must have quintupled.

And so I... sold about half and then hung on to the rest. So that was, I'd say, among my biggest winners. My current house is one of my, it's not an investment, but it's a very nice gain because we bought our house in a short sale 10 years ago and in California. And so it is appreciated nicely. Yeah, that's awesome with the housing stuff there.

I love what you said that before you switched over to passive index fund investing. My understanding is that that really gained traction as a approach in the 90s, 2000s, you know, kind of in general and more of a mainstream fashion. What was your evolution thinking like with respect to that? And how did that kind of... That is another wonderful question. I, as a portfolio manager, I researched individual stocks and bonds and really invest in a stock portfolio. I'm really good at fundamental analysis and valuing companies, et cetera, et cetera. So I went to my

MBA program and I'm like the finance professor says, who thinks they can beat the market? And I'm like, my hand shoots up. Oh yeah, I can beat the market. I'm a great investor. Blah, blah, blah, blah. And she said, well, let's talk about the research. And what I subsequently found was about 30% of active investment managers beat the investment markets every year. 70% of the time, index fund investing works. And the problem with that is if you say, okay, well, I'll go with those 30% of investors that beat the market every year. It's not the same ones every year. So I'm very smart.

I looked at the probabilities. And it was like, oh my gosh, I'm doing all this work. And yeah, most of the time I do pretty well. But the risk reward for me was if I can invest in a diversified grouping of passive index funds and rebalance it back to an allocation, which means a percentage invested in each of the different types of assets, stock funds, bond funds, value funds, international. real estate funds, then I have a likelihood of getting a market return in all of those assets. And the market returns on those assets typically beat 70% of actively managed portfolios.

So I had a huge aha moment. Now, I still own a couple stocks that I could not part with. I just never could seem to sell them. and one is Lowe's, one is Stryker, which is a medical company. And they've done very well, and I still can't see a reason to sell. I'm not going to buy more. Oh, so you keep answering all of my questions as I'm typing, and we have a document that we type our questions in together.

I'm like, oh, I wonder what she thinks of index funds. You're like, and that's when I moved to passive index funds. I'm like, oh, okay, well, I guess she likes them. And I'm like, oh, I wonder if she does any individual stocks now. I want to read an excerpt from something that I'm a big fan of here that I think really emphasizes your point, Barb. And this is from Warren Buffett. So this will be 60 seconds, maybe 90 seconds. We'll see.

I'd like you to imagine a national coin flipping contest. Let's assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise and they call the flip of a coin. If they call it correctly, they'll win a dollar from those who called wrong. Each day, the losers drop out, and the subsequent day, the stakes build as all previous winnings are put on the line. After 10 flips on 10 mornings, there will be approximately 220,000 people in the country who have correctly called 10 flips in a row.

These are the 30% of fund managers, by the way, that Barr mentioned earlier, who beat the market that year. Each of those 220,000 people will have won over $1,000. Now, this group's going to get started getting a little puffed up about this, human nature being what it is. They may try to be modest, but at cocktail parties, they'll occasionally, admit to the attractive members of the opposite sex, what their technique is, and what marvelous insights they bring to the field of flipping. Assuming that the winners getting the appropriate

awards from the losers, in another 10 days, will have 215 people who have successfully called their coin flips 20 times in a row, and who, by this exercise, have each turned one dollar into a little over 1 million. 225 million would have been lost. 225 million would have been won. By then, this group will really lose their heads. They'll probably write books on how I turned a dollar into a million and 20 days working 30 seconds a morning. Worse yet, they'll probably start jetting around the country attending seminars on efficient coin flipping and tackling skeptical professors with if it can't be done, why are there 215 of us? So this, I think, really sums up the passive investing portfolio. Now he goes on to say, hey, if all some of those

coin flippers happen to be all from the same zoo in Omaha, maybe you start looking at them for something that actually does separate that. Maybe there is something special about their coin flipping prowess. But absent that, or absent anything that you can detect unifying it, why do you believe at the past, the active fund managers, given the statistics, are anything better than the ones who outperform the market, are anything better than the ones who picked stocks that happened to do better that year, and we'll have no more than a 50-50 or even 30% shot at outperforming the market the next year? And that's why I don't invest with active fund managers and instead invest in passive index funds. And I think that really emphasizes your point. So,

I think I was probably a little bit longer than 90 seconds, but my point is made. I'll bow out politely now. I love that. That was wonderful, Scott. And I'll link to that article in the show notes here. That would be fantastic. I think you've brought that up before. And I don't know if we've ever linked to that article.

But yes, please include that in the show notes. So I hear people listening in the car saying, oh, well, I chose XYZ stock and I'm doing really well with it. So there's always this, I don't know, drive to prove yourself, but like, oh, I could do better than that. I could do better than that. What percentage does Barb Friedberg think is okay to dabble in individual stocks? What percentage of a portfolio? And zero is a valid answer, if you want to say that. Sure, sure. I don't think anyone's like perfectly disciplined. And there's something fun about trying your luck in investing or trying out these new platforms or portfolios or seeing what you can do with, you know, maybe a more speculative investment. So my rule of thumb is 5%. So take 5% of your

investment portfolio and do whatever you want with it. Maybe you'll hit a home run. If you lose it all, you won't be in terrible shape. Okay, I like that answer a lot. Let me ask you this question. So when I first started out my journey, I saved up 20 grand, and I put it all on a duplex. I put it all into a house hack duplex. I had no diversification. And my belief was that if I bought this duplex, moved in, fixed it up, lived in half, rented out the other half, and lived for free, that that would be a far better use of my investing proceeds than a diversified portfolio.

And so how do you feel about the index fund? What I'm asking this is, if I'm putting myself in the shoes as somebody who's listening right now, and it's just getting started with their first $5, $10, $15,000. The index fund strategy is very unappealing because, great, I'm going to make 10% on 10 grand. That's $1,000 next year. That is not very exciting. That's not going to make any change to my life. It's going to take me a very long time.

Do you have any advice for people who are just getting started out on whether there is a place to lack that diversification, go all in on something that can make a bigger outcome for them in the early days? or do you kind of prefer the slow and steady pile it on approach in the index funds? Scott, your approach wins my vote, and I'll tell you why. First of all, you're living free, okay? So eventually your mortgage is going to be paid off. You're getting rent, so you're getting paid to live. So any time you can slash your housing and your,

cost of living, then that is a brilliant investment. Now, Scott, just out of curiosity, where do you live? Denver, Colorado. Okay, awesome. So Denver, you can get a, you know, a reasonably priced home and make that work. Unfortunately, this is what people from California think. Right. Well, I unfortunately live in the most expensive area of the kind. country, which is like daunting to someone who was born in the Midwest. But, um, so location matters. But I would say if you can afford to do what Scott did with your first $10,000, that's a no-brainer. Do that. Do that for sure. That's an immediate win. Okay. Okay. Great. So it sounds like there are some, some cases, especially in the early days where

diversification, like, that's where it comes to, like, diversification ensures average results. That's awesome for me with my stock portfolio, because I don't think I can get those outsized returns, and an average result on a big pile of money that I've been accumulating year after year after year is wonderful and really secure. And I feel great about that. But in the early days, you guarantee yourself very slow progress with a diversified approach, which I think is the fundamental challenge for a lot of folks. That's very, that's very true.

And that's actually a big negative for some of these small change apps, which they invests the difference between like your purchase and a dollar. So you're investing 25 cents a day. It's going to take you forever to build up any sort of money with that. So if there's a way that you can get a hack to get yourself some capital to start, you will save yourself some, I mean, you'll get a leg up. whether it be a side hustle. Like if you have a side hustle and you don't need that money, you can build up a lot of money more quickly. If you can earn an extra $1,000 a month starting a website or something like that, keep your day job, your spouse keeps their day job.

And then you've got $1,000 a month to build up so that you're making your wealth building process a little bit faster. But yeah, it's very, you know, starting with $10,000 and then waiting for it to compound is like watching grass grow. Love it. That's awesome. I love that analogy there. Okay, so let me ask you another question. I'm just firing now in random directions because I've been enjoying picking your brain on this

stuff. But I, let's suppose that I have a, that for the last 10 years, I've been slowly building and investing and honing this. And I've recently kind of come around to the idea of passive investing. And I've got holdings in other companies that have been huge winners for me, such as a, I bought Tesla or I bought, you know, Amazon or Facebook or whatever it is, right? And so now I've, now I'm like, okay, things are going pretty well. I'm sitting on like 200 grand in these stocks, but I'm way overweighted towards them. If I sell them, I incur taxes and have to change those things over. If I don't sell them, I have this weird portfolio where I'm half in index funds and half

in these huge companies that have been great for me, so I've got a great problem. What do I do in that situation? A lot of young people are in that situation right now. They've built up enormous amounts of money in very narrow positions, and they're like, I can't sell this. It's only going to go to the moon. And if you're a huge risk taker and you don't care if, you're, you know, you you know, it tanks 50% and you can live with that, then don't do anything. If you're more or less, you know, the risk tolerance goes from like very conservative to very risk, you know, comfortable with risk, very aggressive. So I'd say for most people, we're somewhere in the middle.

What I typically recommend is sell half of the positions, you know, so you lock in your gains. So sell half the Tesla. sell half the Bitcoin, sell half the Facebook, and diversify with that. And we've got another situation now that the markets are very, very, very overvalued. I believe in the next couple of years we have a greater likelihood of a market decline than we do greater advances. Now, I could be wrong. Don't quote me on that.

And you will feel a lot better. There's nothing even wrong with taking some cash out, you know, and just saying, you know, I'm just going to, take some of my profits, pay the tax on it because that's what you do, and sit with some cash for a while so I can think. Do you have any tax-advantaged approaches to doing that? Like, are there ways to kind of avoid the capital gain on some of those things? Invest in a retirement account, you know? Or other than that, I mean, with real estate, you know, you've got the 1031 exchange, which may be leaving under the Biden administration. But with stocks, you know, when you sell in a taxable account, you owe the tax.

So, yeah, you really can't afford that. Fortunately, the capital gains rates are lower than they have ever been in probably a decade. So literally, you're better off selling now than waiting for, you know, maybe sometime in the future, they're going to go up and you'll pay more tax in the future. But that's just part of doing business. You can't avoid paying taxes. Make sense. Barb, interest rates, I'm just peppering questions now with this. So interest rates are really low. So buying bonds seems like I'm not going to get very much

income. Stock market is really overpriced, right? Or it's at a very low PE ratio or very high PE ratio, right, where I've got a very little income being generated by per dollar invested there. Real estate prices are at all times highs because of the low interest rates that are here that are making them that much more affordable for homebuyers and landlords and those types of things. So how do I think about that if that's terrifying me from an investment approach perspective? I resonate with that because you have to look at your money in terms of short, medium, and long term. Any money you need. Any money you need, need within the next five years, I wouldn't put it in the stock market. If you're saving up for a home

and you've got some money in the stock market, you think, oh, I'll just put this in my down payment in two years. Well, if you lose 30% of that money, you're going to be really upset. So money you need for the short term, bite the bullet, put it in a CD or a money market fund. You're not going to earn any interest, but you're not going to lose any principle. Money that you need for 10 years, well, you know, or for retirement, keep invested in the markets and realize there are ups and downs, but timing the market is really, really hard. And then if there's money you need in like seven years, that's kind of a tougher call, and I might just pull some out into cash and leave the rest there to see what happens.

So let me ask you another tricky question with this. So pulling some out in cash and seeing what happens, you know, what if all of these prices are still too low because the looming thing on the horizon that it seems like the market is betting on is inflation. So that means that if I take out cash, I'm also in a really risky position. So I can't win on any of those four alternatives, bonds, stocks, real estate, or cash. What do I do? You are absolutely correct.

And that is why we are diversified. Because I was looking at some research by Jeremy Grantham at his GMO fund. He's a brilliant guy. And he did asset projections for the next seven years for major asset classes. And every single U.S. and global asset class showed negative returns for the next seven years, with the exception of international, no, emerging market value stocks, which, look, this is one guy, it's not a guarantee, but it brings up the point we are in a very unusual situation. What my personal belief is, and this is, you know, you may or may not agree with me, is, yeah, inflation may kick up, but if I need money in the next five years, I want to have cash. Yeah, I might lose a little bit per year due to inflation. But if I leave it in the stock market and I lose 30% next year and 20% the year after, like the S&P for,

500 lost in 2000 and 2001, I will be much happier in cash than I will in the stock market. So it's all about risk mitigation and diversification and the length of your time horizon. Yeah, I think there's a lot of people who have been writing this extremely long wave that we've been having since, what, 2012, is it? When did it start going back up? Because eight, it was dropping. 2009. Oh, it started going back up in nine?

Okay. So that's, what is that, 11 years? That's a really long time. That's a, and a lot of people, especially people like Scott, who are younger, this is the only market they've ever known. He graduated, when did you graduate from high school, Scott? I graduated from high school in 2009. So getting high school jobs was not very fun.

But I graduated from college in 2013, which is fine. It was a great economy. And it's been booming ever since I began investing, both in the real estate and stock markets. So I've only ever known that. And I've only ever also known the fear of, wow, this booming market is going to come to an end. And the depression, the pundits are always, I have a list of them, you know, articles from the last 10 years. And it's always the bubble is about to pop in about 18. to 24 months, right?

And so I've got articles predicting that from 2013, 14, 15, 16, 17, 18, 19, 20, and then recent article just said basically the same thing again. So one of these days, the punnet's going to be right, and they're going to do that. So I know the fear, but I haven't actually experienced that huge drop, except for, with the exception of that market crash that Mindy called to the T in March of 2020. Yes, we all know about her predictive abilities. I blew it all in one shot right there. But yeah, I think that, that, you know,

you cannot continue to expect these unbelievably ridiculous gains that we have had over the last 11 years. And when people who have been investing in this market only start to experience that, I think they're going to be in for a shock. And I love your concept of thinking in short, medium and long term, you are still going to need to retire at some point or, you know, be able to pay for retirement when you don't have a job anymore.

Even if that's not early retirement, even if it's 65, 70, 75, 75, you're still going to need money to live at that time. So putting something in the stock market right now is a good bet because the stock market goes up into the right, not every year, not every day, but over the course of time, it goes up into the right. and I am a firm believer that it will continue over the course of time to go up and to the right. Past performance is not indicative of future gains. But I'm a big believer in the country of America.

And the stock market that I'm investing in is the American stock market. And I really think it's going to continue over the long haul to grow. Short term, I have some money in savings accounts, but they're paying nothing. I don't have any. I don't know what I'm thinking about in medium term. I haven't thought about medium term money. But, yeah, I guess I just wanted to throw that out there that, you know, I do still believe in investing in the stock market. But, you know, yeah, when you need it in the short term, don't put it in the stock market.

Because imagine you needed to pull money out at the end of March last year. Now you lost all this money, you know, lost it. It did come back, but did anybody predict that it was going to come back in like 30 days or whatever ridiculous? less bounce it came back in? I think it just all comes back to like, let's spend less than we earn, build up a strong emergency reserve, invest consistently but not aggressively for the long run where we can, and maybe start with a house hack as part of that. We all agree.

Okay, well, let's look at where Barb is investing her money. She talked about index funds. You talked about a couple of long-term stocks. what does your investment portfolio look like in terms of percentages? I have probably a 65 stock, 35 fixed portfolio. And in the fixed portion, I have some bond investments, which are bond funds that I have some municipal bond funds. I have some bond funds that have a term.

So they have all the bonds, their ETSs, and they're by I shares, and they have a term. So one term is up at a maturity date. So they're funds, but they act like an individual bond. So it goes up in December of 2021. I have another one. I kind of ladder them, another one that comes due in 2023. so that way if interest rates are higher, I can reinvest that fixed money in other bond funds with higher returns. On the stock side, I have U.S. diversified index funds.

I have SPY, which is the standard in pores. I have VTI, which is Vanguard's total market. I have RSP, which is an equal weight U.S. stock market fund, which will favor more value stocks because it is not market capitalization, which means, for those who don't know, most of your index funds are market capitalization weighted, which means the bigger companies have a greater weight than the smaller companies. Then I also invest internationally. Oh, wait, in the U.S., I also invest in some small caps, some small cap value.

mutual ETFs, mid-cap, and then REITs, U.S. Reets, just a diversified U.S. Real Estate Investment Trust.

Then I have international holdings, a broadly diversified stock index fund, developed market, emerging markets, and I did have an international

reet stock market, stock more real estate fund which I sold just the returns were horrible I'll probably regret it because now they'll probably go up since I sold it so that's kind of so just in a summary I have a diversified US and global stock and bond portfolio weighted towards small caps and value because historically value stocks have done better than growth stocks. although not recently. Do you, do you, do you, so it sounds like most of this portfolio is going to be publicly traded securities, managed through your brokerage account and IRAs.

Is that right? Yes, absolutely. That is correct. Do you have other assets? I also have a couple of robo advisors. Okay, great. I do have to put a plug for that. I love robo advisors. I review them.

I think they are wonderful. And I do have a couple of them myself. Do you have other assets outside of those things? Like, for example, he's mentioned you have a house in California, you have a business, you have a cash position. Is there anything else maybe beyond those? Or could you walk through those other assets? No. I do not at present. I get pitched. I look at all the time. Private investment opportunities, investment opportunities and alternative types of platforms, crowdfunding. I did have two. debt crowdfunding platforms that I am, they're long-term holdings so you can't sell those until all of the loans within those platforms come due. So I invested in those probably eight years ago and I am now taking my money out of those because I just don't like the returns for the amount of risk, a lot of defaults. So that's the really only alternative crowdfunded type of investment that I have. Oh, nice. We're in the same club there. I actually lost a

good amount of money through a dead crowdfunding portal myself. It doesn't sound like you lost money, but yeah, that was fun. Yeah, yeah. Well, yeah, we all have losses, and that's a reality. And yeah, at first I was getting like 9% returns. By the end, I was getting 3% returns. And it's like, I don't need this, you know. So I'm unrolling my position. And I, I'm, I'm, I feel like I, although I always get excited, I'm on the Money Tree Investing podcast, and we get all these opportunities. And every time I hear someone, it's like, this sounds fabulous, I've got to invest. But when it gets down to it, I try to keep my life kind of simple. And a lot of these other type of investment platforms require a lot more due diligence.

And because a lot of them are not regulated in the same way that the public markets are. So I'm not saying I'll never invest in a private investment, but I've just haven't done that right now. I like that comment. You have to do your due diligence. Don't just hear about some hot new investment and be like, oh, I'm totally going to jump in with that because you could lose everything if you don't know what you're doing. And I think that's really great to remember. Okay, Barb, in terms of monthly spending, how many months do you keep on hand in cash or other easily liquidatable funds? Well, you have to remember that I'm a lot older than your typical. And you also have to remember that I'm in the retire. I'm in the sphere where people retire. And so I always have in the back of my mind, well, maybe I will want to retire.

And my husband, you know, as well, he's like, you know, maybe we'll want to retire. So I preface that. So we have two years. Okay. I think that is a really important question because I think there's a lot of people out there who don't have adequate cash reserves and there's this idea, oh, I can't have any money just sitting around. I need to have every dollar working for me.

And no, sometimes your dollars are working. for you by sitting there waiting to be deployed in an emergency. And if you can't cash flow almost any emergency, you should have some dollars sitting to the side. So I like that answer. I like that answer. Okay, it is now time for our famous four questions. These are the same four questions we ask of all of our guests. Barb, are you ready? Yes. This has been delightful, by the way. I've really enjoyed you being here today. This has been so fun. I could talk to you guys all day, although I'm sure the listeners would be totally bored by the end. Okay, Barb, what is your favorite finance book?

The Elements of Investing by Malkiel and Ellis. It's 100 pages, and it is an easy read, and I think everyone should read it. All right. I haven't heard of that one before, so that's an interesting. I'll go check that out. What was your biggest money mistake? I think it was a house that we bought in Indiana. We had back in long time ago, we used to live in California, and we lived there for 10 years, and after our daughter was born, we decided we wanted to get off the rat race and move back to the Midwest, where we could raise a child without both of us having to work full time.

So we took a job in India. my husband took a job in Indiana with the intent, I would stay home with our daughter. And because the dollar bought so much more in Indiana than it did in California, we bought a huge house. Brand new, beautiful, decorated it just the way I liked it. Modern, contemporary. Think Indiana, okay? Is that the style that goes in Indiana? Then the job was not great. fact, my husband didn't like it at all. So two years later, we were ready to move. Put the house on the market and people didn't like it. Finally, we got, and this is so important, we got a realtor who said to us, well, I have someone who wants to make an offer, but it's, oh, I think

it was like a 10%, we would have taken a 10% loss if we took it. And I'm like, no, we don't want that offer. Long story short, we ended up selling the house for a $25,000 loss. We should have taken that offer. And my lesson is that when someone says, I have someone that wants to make an offer, get them to put it on paper because then you can always negotiate. If you say no, you have no choice. So that was a huge learning experience and a very big mistake. And then we ended up selling it for a $25,000 loss. Sounds like you got hoosed on this house. He got hoised.

I got hoosed. That is right. And another piece of advice, if you're decorating in Indiana, probably don't want to go for a really modern look. More traditional is big in Indiana. That is still good advice to this day. I used to live near Indiana, just on the Illinois side, and yeah, not a lot of design trailblazing there. Okay, besides that piece of advice, what is your best piece of advice for people who are just starting out?

Gosh, I could talk to you guys forever, and I would love to, but if you are just starting out, be patient. do the smart things financial success takes time and you're not going to get there overnight so balance out how you want to live today with saving and planning for the future so save part of your money invest in your 401k, create an emergency fund of at least six months. And if you can, set up a brokerage account as well. Have your money automatically transferred out of your paycheck. If you can't see it, it'll be easier to live on what's left in your checking account. Yes, yes, yes, yes, yes. Great advice. What is your favorite joke to tell at parties?

I am the worst joke teller ever, Scott. You're going to have to, you're going to have to, I'm handing you the reins, Scott. I can't do it. You're going to regret that. Here is a gem that we got from Anonymous. I got hit in the head with a can of soda yesterday. But luckily for me, it was a soft drink. Okay. Where could have done that one? Where could people find out more about you? I would love to hear from you. So you can find me at Barbara Friedberg Personal Finance, Robo Advisor Pros, and my brand new YouTube channel called Barbara Friedberg. I have 200 subscribers. And I know that does not sound like a lot. But I have to tell you guys, I love those 200 subscribers.

All right. Well, go check them out and we'll link to all three of those areas in the show notes. Yeah, this is awesome. The show notes can be found at biggerpockets.com slash money show 185. Barb, this was fabulous. I knew having you on was going to be fun, but I didn't know it was going to be this fun. I'm so pleased to be able to spend time with you today. Thank you so much for coming. Yeah, thank you. This is great. Thank you for having me. You guys have just made. my month. So,

all right. Thrilled to be here. It's the first day of the month, so, or like a second, one of those. So, yeah. So we appreciate the compliment. I'm glad this could be, you know, so far. Okay, Barb, we will talk to you soon. Barb Friedberg, Scott, I already knew Barb before this. What did you think of the episode? I thought she was fantastic. I think she's really smart, as she said so. And I think she has a really good approach to wealth building.

I think she had really, it was fun peppering her with questions and seeing her just fire off responses because she's clearly mastered a lot of these mental models around wealth building. And I just had a great time and learned a lot from her. I did too. I love her thought process. And, you know, this isn't rocket science. This isn't something you're going to have to really learn and understand. And she was a financial advisor.

She was a fund manager and she still invest in index funds. The story that she told about having the teacher ask, who in here thinks they could beat the stock market? Your only 30% chance. And your chances turn over every year. So you can't, in short, you can't beat the stock market long term. And making smart decisions so that you can hopefully match the stock market is the best way we go. Well, guys, I am really interested in the, the exploring more deeply, potentially the

question that we posed to her about around like, hey, real estate's expensive, stocks are expensive, bonds are low yield, inflation might be living on the horizon. What do you think you invest in or how do you think you approach that problem, if different from the conservative, diversified, all-around approach that Barb referenced on the show earlier today. I would love to hear your opinions. And let's have a discussion on that in the, Bigger Pockets Money Facebook group. Yes, you can join our Facebook group at Facebook.com slash groups slash BP money.

And we're going to post this question in the Facebook group. And I would love to hear your responses because, yeah, where do you put your money? Where do you plant your money so it can grow? Well, everything's already grown to the top, or so it seems. So we recorded this show at the beginning of March. I'm curious to see what happens this March, because last March was kind of a wild ride. So hopefully we have a. a very calm and boring march, but we will talk to you on April 5th in the Facebook group.

Scott, should we get out of here? Let's do it. From episode 185 of the Bigger Pockets Money podcast, he is Scott Trench, and you can find him on Instagram at Scott underscore Trench. I am Mindy Jensen, and you can find me on Twitter at Mindy at BP. And we are saying, Tudaloo, kangaroo.