BiggerPockets Money Podcast - 213: Retiring in 6 Years After 20 Years of Money Mistakes

Episode Date: July 12, 2021

Growing up in Mexico, Saul Tijerina didn’t fully understand the concept of financing. It wasn’t that he couldn’t conceptualize financing, it was more that he wasn’t around it enough to think of it as an option. In Mexico, everything was sold for cash, whether it was a home, a car, or a new TV. Owning something meant that you really “owned it”, not just “I’m paying this off.” It’s no surprise that when Saul came to the United States to work, he was in for a financial shock. New car? Finance it. New house? Finance it. Want to eat out every day? Charge it to your credit card and finance it! This was the cycle that Saul was in for close to two decades, before discovering the FI movement. Once he started digging around online forums, blogs, and YouTube channels, he found a community that not only hit financial independence but hit it at an impressively young age. Now, about two years into his FI journey, Saul has made monumental progress with saving and investing. He’s on track to retire as a millionaire in 2026 and will live off of his taxable accounts until he is old enough to take out funds from his tax-advantaged investments. In This Episode We Cover Why lifestyle creep can be incredibly dangerous for young adults  Paying attention to the interest credit cards charge and never falling into high-interest debt Why financing a brand new car can be a huge blow to future wealth accumulation Staying away from the “two-income trap” and keeping expenses low Roth IRAs, 401(k)s, Conversion Ladders, and other retirement accounts Saul’s 72 Hour Rule for spending (especially online shopping) How to get your partner on board for FI when they may not know about financial possibilities  And So Much More! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 213, where we interview Saul T. Herrina from My FI Journey and talk about reaching financial independence despite making a ton of money mistakes early on. At the same time, it was so easy to just go finance another car that we were like, well, why not? Everybody else is doing it. This is the American way. You know, might as well play along. You know, everybody's playing the same game. Let's go ahead and play that game. Hello, hello, hello. My name is Mindy Jensen and with me as always is my always knows just what to say, co-host Scott Trench.

You put me on the spot, Mindy. I don't have anything today. You can't win them all, Scott. 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 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. state, start your own business or fix 20 years of financial mistakes. We'll help you reach your financial goals and get money out of the way so you can launch yourself towards those. Okay, Scott, I am super excited to bring Saul in today because his episode is amazing and it's

also very long, but it will fly by as you listen because Saul really knows how to tell his story and it is fascinating. In a nutshell, Saul has made some money mistakes and he is now fixed his financial misdeeds of the past and is on his way to financial independence. Yeah, this is one of my favorite episodes we've ever recorded. And there's a lot of great ones, but this, I think Saul's story is extremely powerful. His mistakes are extremely powerful. His cleanup is phenomenal. And his vision for the future is awesome. I love this show. It is very long. So let's just go ahead and jump right into it. But I think you're really going enjoy this one. Yeah, I think so too.

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your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP Money. Saul T. Horina from My FI Journey. Welcome to the Bigger Pockets Money podcast. I'm so excited to jump into your story. Thank you. It's amazing to be here and get to talk to you. Well, let's start right off the bat with where does your journey with money begin? Sure. So it really started in the year 2000, but let me back up a little bit because I was born in the States, but I didn't grow up in the States. Right. So I grew up in Mexico. And growing up, you know, in the 80s and 90s, at least in Mexico, there was no concept of financing anything. So if you were driving a car, it was because you owned the car, you know, fully. You weren't making payments on it. If you lived in a house, you were either renting it or you owned it full, no mortgage payments.

There was no such thing as a mortgage back in the 80s or 90s. Right now, I think there is, but it's not as easy as it is in the States, right? The interest rates are way higher. So, and also, both my parents were teachers. So there wasn't really a lot of excess anything. I mean, we never went hungry. We always had a roof over our heads, but we never really went above and beyond. We never had conversations about money management because at the end of the month,

there wasn't really that much money to manage. And I just grew up with that mentality of, you know, if you're going to buy something, is because you have the money for it. So in 1999, I finished my degree, got my bachelor's in electronic systems engineering in Mexico, and I hear that this company in Virginia close to D.C. is going to come over and do a recruiting event. So I apply. I get selected to interview, and then I get an offer. And the offer came in December of 1999, I think it was the first week of December. It came in for $45,000. And when I saw that offer, I started to myself, I am rich. Like, I'm, like, without thinking about anything else, I'm like,

oh, yeah, like, I'm doing this, right? Can I ask a quick question here? You were born in the States, so you're a citizen. And so that, okay, I just want to, I think that's a critical point for getting that job. Yeah. So, so they actually, they did go, they would interview people from Mexico. And it's funny because a couple of friends of mine also applied. They also got a job, but they had to start a little bit later because they had to wait for their H-1B visas, their work visas to come through. I was not in that situation. So I could apply and start working as soon as I wanted to. So also the, the offer also came in with a $3,000 signing bonus, a one month of a car rental. and an apartment while you figure out where you would stay. But it also came with a caveat that you had to complete and pass a eight-week boot camp training. If you didn't pass, whether it was a training or the exam, you were very politely asked to go back. So at that point, I told that to my then-girlfriend. I proposed. She said yes. The plan was, I'm going to come over, make sure that I can keep a job,

you know, wait the eight weeks. Then we start planning our wedding. We get married, and then we come both live in Virginia, close to D.C. So she accepted, and then comes January 2000, and that's when it really all began. So I remember the day because it was the coldest day ever for me. It was January 8, 2000. I get my rental. I get lost trying to find my apartment because I had my, you know, back then, there's no

smartphones or smart anything. You have to print directions. Everything looks a lot smaller. and, you know, back then it was Yahoo Maps. I got lost trying to find my apartment. Finally, I did it. And I'm like, okay, well, cool. I started going to work about, I think this was January 10th was the first day.

About two weeks in, so now it's like January 24th. I can tell that I'm going to be able to make it. Like, you know, the eight weeks are going to be not easy, but achievable. I'm going to be able to keep the job. So I called my wife. I'm like, yeah, we can, you know, let's start planning the wedding. Like, we're going to be able to do this. And also in my head, I'm thinking, you know, $45,000 a year, that's $3,750 a month, right?

I'm like, I'm going to be good. So I started looking for an apartment being married or soon to be married. I didn't want to really have roommates. So I wanted to look for an apartment just for my wife and I. I was able to secure one that was about $1,000 a month in rent. And because my car rental was also going to be due in a month, I had to go and find a car. And I was still with that mentality of you need the full amount of month. money to buy your car, right? So I had $2,000 back then available to purchase a car. So I went to the

first car lot that I found with used cars in it. I asked to see their used inventory and I could not find anything for less than $5,000. And I'm like, well, I'd like, this is not going to work out. But then the sales guy says, well, you know, we got great financing opportunities for new cars. And I go, what do you mean financing? Like, I had no idea what that was. And he's like, yeah, you can go home with a new car with no money down. You know, you can take as long as seven years to make the payment on the car. You know, it reduces your monthly payments a lot. You know, come over, start looking at what we have. So I did. And I ended up driving a new car. It wasn't a fancy car. It was a Dodge Neon. I don't think they make them anymore. But I do remember the monthly payment was about $250.50. Right. So at that point, I'm thinking, okay, 3750 a month minus $1,250. I still got $2,500 left. And I was, projecting that over, you know, however months we were going to get married in July. So I said, yeah, I'm going to have more than enough to pay for our wedding because we were going to be the ones paying for our own wedding. The plane tickets, you know, for me going back and then for us coming back home.

So I said, okay, we're going to be good. And then payday comes. The end of January comes in. It was going to be my first paycheck. And it's significantly less than what I thought it was going to be, right? That's when I found that I had this uncle named Sam and that he enjoyed getting some money in the form of taxes. I had no idea about taxes or the fact that you got, you know, taxes withheld from your, from your paycheck, you know, or Social Security or Medicare.

None of this existed for me growing up in Mexico. I mean, my parents, like I said, they were teachers, right? They got their pay was already after taxes. There was no tax, you know, tax conversations anywhere. I had no clue what this was. It actually came down to about really $2,000 take home pay per month. So I'm thinking I only got $7.50. after the car payment and the rent.

And that's not counting food insurance for the car, nothing, let alone just save enough to pay for the wedding, pay for trips. And also, obviously, our families are still in Mexico. So the whole concept of let's move to Virginia came with a yes, but we are going to be visiting our families in Mexico during the holidays. And I'm like, yeah, of course, right? So I'm in a situation where, like, what am I going to do, right?

It's not like I can call my now fiancé and tell her, yeah, you know what? We can't get married because I don't have enough money left over. So what was my solution at that time? Credit cards. That's what I ended up doing. Wow. It's like you lived in America your whole life. I know, right?

The interesting thing was I started getting those pre-approval letters in the mail. And I was like, oh, well, I'm pre-approved, right? I figure out, you know, if I can get a card without putting a seat. single dime down and take it home, yeah, of course I'm pre-approved for a credit card. So I filled out an application. Back then, it was still snail mail. There was no, or if there was an online application, I don't think it was that safe to do. So it was still through the mail. A couple of days later, I get declined. So I submit another one, and it comes to decline. And I keep doing this for like seven, seven or eight times. And every single time I would get a

declined. And I'm thinking to myself, where how is this possible? Am I not pre-approved to have this credit cards? So I tell one of my coworkers about this, and they're like, oh, yeah, it's probably because you don't have any credit history. You know, you just move back to the States. There's no history for you. You just have the car payment. You're probably going to need somebody to co-sign with you so that you can get approved for a credit card. And that's what I ended up doing. I asked somebody at work who was fortunate or not fortunate, but graceful enough. to actually co-sign for me to get a credit card. And that's what I ended up doing.

And I wasn't really, like, I never paid attention to how much am I going to be paying an interest. You know, what does this really mean? I just thought, you know, you're putting it in a credit card. You're able to pay it over time, you know, and I need this because I got a wedding to pay for. I got trips to pay for. And my salary right now is not making it up.

I said, once I get the wedding out of the way, you know, I can cut my expenses more because it's not like I'm going to pay for weddings every single year. So I'll bring that balance down. Well, first year, I mean, we were probably like close to $10,000, $12,000 in credit card debt. Because obviously, you're newlywed. You're not just going to be, you know, saving money. Like you want to, it's a new place. It's a new area.

You want to, you know, go to museums, go to restaurants, hang out with friends that finally made it back after getting their H-1BVis of dining out. Keep in mind, they're, they have roommates. So their rental expenses is probably $200, while ours is $1,000. So they got more money available to go out every week or every other week. We don't, but we still do it. The way you tell this story, on the one hand, I'm like, yeah, that's how it is. And on the other hand, hearing you tell it, it sounds so predatory. Oh, I know I can finance a new car because everybody does it.

But when you say, oh, I thought I had to buy it with cash and they're like, wait a second, You can finance it. He's like praying on you and your naivete. And that just sounds mean. And then the coworker who co-signed for you, it feels like he's doing something great for you. But now he's giving you the opportunity to be in debt. And it sounds like the company is sending you these credit card. I get so many credit card offers in the mail.

And I just rip them up and throw them away. But it's just part of it. life and for you to say, hey, they were sending me these. I guess they're, I'm pre-approved. This is great. It's not great. This is mean. Welcome to America. Here's a boatload of debt. Exactly. Exactly. I mean, I know that now, but, you know, it's 21 years later, right? So, so thanks, thanks a lot. You know, nice and welcome back. Welcome back gift there. And then also, so my wife came over and she was not born in the States. So she couldn't just go and start looking for a job either. She had to wait for her work permit to come through. And also,

she had a sub-degree in food science engineering, but she couldn't really find, we're in the D.C. area, it's more of a corporate government IT focus, and hers were more on the food science industry. So I guess FDA could have been something, but here it's more corporate enough. This is not the actual, you know, food sciencey part of it. So she ended up going into real estate. She got her license, for Virginia. She didn't really get it until mid-2001. And at that point, I'm thinking we're great, right? I mean, house prices here, they've always been higher than pretty much everywhere else, definitely in Texas, which is where I kind of, you know, also knew about from growing up in the border town. But it was just me thinking as soon as she starts selling those high-price homes, she's going to bring, you know,

she's going to start coming home with a lot of money. And the mistake there was, I was already spending money she wasn't even making. We weren't even bringing home. We were already planning, okay, this is what we're going to do with it, right? The fact that she became a real estate agent meant we had to find another form of transportation because with the one car, we tried to make it work. We tried having her drop me off at work. Then she would go do her open homes or whatever she needed to do, but the hours were just not working out for us. Like I would come in really early in the mornings, and then she would come pick me up really late at night, and it was just, it was was it was hard to go by, and at the same time, it was so easy to just go finance another car

that we were like, well, why not? Everybody else is doing it. This is the American way. You know, might as well play along. You know, everybody's playing the same game. Let's go ahead and play that game. So before you know it, you know, we got another car. And it was a new car because, you know, that's where the better finance, I guess,

deals are or so we were told. And it just keeps getting deeper and deeper. You're thinking, oh, well, now it's been another year. You know, your wife is working. You can bring down the credit card. But as we started making more money, we just found a way to spend more money every time. It didn't matter. And I think it might be possibly because me growing up, we never really had any extra money, right? So now that I had extra money, I just didn't know what to do with it other than, well, what can we buy? You know, can we get a better car? That's when we, in 2002, we finally bought our house. We only put, I think it was a 3% down or something like that, 5% down. And I'm thinking, well, my wife's a real estate agent. She knows how this works. I told my wife,

I just need to know how much is a down payment and how much do we need to pay every month. I didn't really understand interest rates. You know, over 30 years, you really paying, you know, twice, if not as much, you know, for the actual price of the home after your factory and everything else. Closing costs, agent fees, none of that. I figured if my wife is okay with going ahead and buying the house, she that is a real estate agent, we're going to be good. Like, it's, we're going to be okay. And so we did. I mean, it was, it made sense thinking from it, from moving to renting to actually owning a home.

Just because as far as the payment goes, it wasn't that it was probably like $100, $150 more every month for the mortgage. Granted, it was probably an hour away from work versus 15 minutes. But we figured, again, this is the American way, right? Buy a house, get a car. We had to start soon, and we found an opportunity to start within two years of living in U.S., we figure, hey, we're ahead of the game, right? We're able to buy a home now. And obviously, you move from a one-bedroom rental to a three-bedroom home, it feels empty. So, of course, now you've got to buy stuff, right? You've got to buy that formal dining room,

you know, furniture for the other bedrooms, a bigger couch, right? And it's just, it kept adding, right? So that was basically our journey. The credit card just kept, you know, the balances just kept getting bigger. My line of credit started getting bigger, right? I mean, I think for the first year, I only had like a $12,000 limit. It grew to up to $35,000. I'm like, I don't, like, it was a point where I didn't feel comfortable having Dutch that much credit because I knew the damage that I could do, not just not knowing, you know, what I could get into. And then, unfortunately, me not growing up with not having a lot of stuff or my family not really having a lot of. lot of stuff. And here just being so easy to get stuff, you know, everything is financial.

We got into a loop of getting a new car financed every two to three years. We're actually on lucky number 13 right now, which is, by the way, the last car that I'm ever going to finance. We have two cars. One is paid off. The other one's going to get paid off in a year and a half, and we're going to run those guys until they stop. But then the same thing happened with homes, right? The one that we bought in 2002 was pretty far from work. In 2004, we decided to start looking for something closer. And it was a good year. We did make a profit. That's when I learned about the capital gains and the fact that if you stayed for two years in your primary residence, you didn't have to pay any capital gains on anything you made on the home. So we basically

use that money to putting in a down payment for a home that was closer to work. In that home, we stayed for 10 years from 2004 to 2014. We put in a lot of money into it. And I mean a lot of money. Like we replaced windows, ended up replacing the kitchen, the bathrooms. We spent, I don't know, it was probably like a fifth of the price of the home, just in remodeling it.

But then it came a point in time where every single month there was something that had to be fixed in the house. a water leak, electrical, you know, roof leaks. And I just felt like I was spending money equivalent of having a new home, but spending it on an old home that I wasn't really enjoying because there were so many issues that had to be fixed, right? The AC broke had to replace that. The water heater broke, had to replace that. Everything kind of got together in the last year. This is the home you bought in 2002 and sold in 2004 that we're talking about? No, no, no. So we bought This is the one we bought in 2004.

Okay, so you bought the 2004 home and had problems for years with the 2004 home. Yes. Okay. Correct. So 2014 comes around, and that's when I'm realizing, you know what? I'm spending the same amount of money as if we had a new construction, like a new home, that is not going to have any of this issues. And I'm not enjoying that new home life because I got to fix something.

I got to worry about something new every month. So we decided to, you know, sell that house and go into, you know, look for new construction communities. My wife was not 100% on board, but I just felt like so maybe not unhappy, but just frustrated of the fact that I was spending so much money and something that I wasn't feeling like I was enjoying that we ended up just going for it, right? We bought a new home. We ended up selling that home for the same price. We purchased it pretty close to the same price. we purchased it in 2004. So we didn't recoup anything that we did to make it better.

So that was a huge mistake right there. We just lost, I mean, if I say 100 grand, it's probably pretty close to that based on the home prices over here. So we moved to this new home, and it was great, right, for the first couple of years. No plans I'm moving anywhere. But then we, and by the way, through these years, you know, replacing cars every three years because that's the American way. So we're at 2004, your journey began in 2001 or 2000.

And during that, when you first moved to D.C., you were making 45 and your wife was making zero and then she became an agent and all that. How is your income changing over this 15-year period that we just kind of moved through? We talked about mistakes, but sounds like there was, maybe your career was going pretty well on that front. Yeah, being in the DC area with an IT background, and I was lucky enough to start in IT with email systems. And pretty much from 2000 to 2007, email became the new phone, right? Nobody would call anybody. They would just email everybody. Now it's whatever, WhatsApp or texting or whatever the new thing is. So there was high demand for that. I got all the

certifications that I could in order to be, you know, the better candidate moving forward. And I was able to change, like, I've been changing careers because I worked with a lot of government agencies. So either the contract ended, you know, had to find something else. And every time, you know, my salary kept growing. So yeah, over, over this, you know, 14, 15 years, it probably grew three times fold, right? But here's the thing. Every time I made more money, I just found ways of spending it. I didn't really have a goal for that extra income. I just figured I make more money.

I can get a better car. I can get a better house. I can get a bigger TV. I can get a better whatever. That's what I see everybody else doing. I basically got in the trap of keeping up with the Joneses, right? What was happening to your wife's income during this period as well? So it started low because starting as a real estate.

agent. She went working with a fur company, so she got the, oh, you're going to go show this house. But she was basically part of the team. She wasn't the main listing agent. I don't think she got her first listings, you know, for about two to three years. So it was getting better. It definitely helped. And actually, we did, we did do something right in the midst of everything. And I think it's also based on the fact that I grew up in another country. And in Mexico, it's very, or it's not very uncommon, at least not in the 80s, of having the father figure or the man be the one, the provider, right? So I kind of grew up with that mentality of I don't want you to have to work

so that we can live the way we want to live. So what I told her is whatever money you make, you know, put in a separate account that I don't get to see because I don't want to think I have that money. And that helped us, you know, now. But yeah, back then she started working on that. The only issue was also, or not the issue, but she also changed careers from a real estate agent to more of a mortgage processing or loan officer type work, which I don't really understand what the difference of those are, but she did. But it was a more stressful job for her as well. So it got to the point where the stress was just too much for both of us, and we decided that she should take a leave of absence from working.

just because it was, you know, it was affecting her sleep. At that point, I was also working at a place where I had to be there by 6 a.m. And it took me about an hour to get there. So I had to wake up at 4, 4.30 in the morning. So that wasn't helping her because, you know, she was probably not really falling asleep until 1, 1.30 in the morning. And then 2, 3 hours later, I was waking her up. You know, I was trying to be as quiet as possible, but it definitely didn't help.

But by that time, like, I was making enough money that it really wouldn't. affect our current lifestyle. Awesome. Thank you. Thank you for adding that context. I was just, I was just curious about that because I think that, you know, that, that was happening behind the scenes while you're, even while you're saying, hey, I'm, I'm buying better

stuff. It sounds like there's something going really well where you have a pretty good, really good career going on here. Yeah. Oh, yeah. Yeah. I mean, my career has gone really good. Professionally, I don't think I've made many mistakes, but it's the financial side where I just

had no idea. Like, I didn't know what to do. I knew what I saw everybody else doing, and I figured, that's what this is all about, right? You know, I had, my other issue was I really, like I said, I didn't have a goal. I didn't have a purpose for, now that I'm making more money, you know, I'm trying to get to this point. I didn't have that point to go to to, to look forward to. I just figured, okay, now what? Oh, look, something shiny. Let's go buy it. Well, let's pick up back at 2014 when you're changing homes again. And I'd love to continue the story. And then I'm excited to hear about the pivot point for you when you kind of.

So we've got a waste to go yet. So it's 2014. It's a bigger home. So obviously, it's back to the, you know, move from the smaller place to the bigger place. Oh, you've got to buy more stuff now. Now instead of being a three bedroom, it's a four bedroom. Well, we've got another bedroom to furnish. So every time, right, something came up that we had to pay for it.

And two, three years into that house, I changed careers in 2015 to the company where I'm employed right now. And I am not living this company, at least not by my own accord, until today I've become financially independent and decide whether or not I want to stop working or not. But once I get into this company, I find that there's another opportunity. professionally it's a really good move, but it requires us to move to Seattle. And I don't get any relocation assistance. Like if we do this, I take it, I got to move on my own. And it's all on me, whether I want it or not. So I tell my wife, she's definitely not wanting to move, but I guess I'm more stubborn,

and we end up moving anyway. And first we started thinking, okay, let's rent, because neither of my wife or I really had spent any time in Seattle. We didn't know the neighborhood. We didn't know anything about the area. So we started looking online for rentals. And we started noticing that the rental prices were pretty close to what a mortgage payment would be. So I'm thinking to myself, well, why spend money renting when we can purchase, get that, you know, tax advantage of, you know, being able to deduct the interest? At that point, we thought it was the best move.

So we ended up doing that. We sold our home in Virginia in 2018, and we moved to Seattle in 2018. However, when we didn't really went to Seattle ahead of time, we worked with a real estate agency that did basically showing through FaceTime. That's how we saw the home that we purchased in Seattle. we never sat ahead of closing. The first time we actually sat in person was the day we got our keys, and we were just shocked once we came in. It looked a lot better in video than in person.

Immediately, also, the fact that my wife was not fully on board, I knew I had to make it up to her anyway, I could. And she started complaining about the house. Oh, the kitchen is horrible. The floors need, you know, I don't like them. And I don't know if it was just the fact that we were not in agreement. We were not on the same page here.

That it was kind of her way of telling me this was a bad idea. And my way of trying to fix that bad idea was to try to do like everything to the house that she wanted it to be done just to get, you know, some form of acceptance of the fact that we moved. So it kind of became another, another 2004 to 2014 type home where we spent a lot of a lot of money in fixing it. We had friends from Virginia visit us in the summer of 2019. And when they left, both my wife and I said, yeah, we're not going to be able to stay here. Like, we missed our friends from 18 years way more than what this career opportunity was bringing me, right?

So we ended up selling that home less than two years of living in it. Not that it matter because we ended up selling it for less money than why we paid. for it, and that's not counting the fact that we spent a lot of money, like, you know, remodeling it. Huge financial mistake. I think that was probably one of the worst, as far as the amount of money in the amount of time that we basically just threw out the window. I mean, I think if it had not been for that particular one, I could probably be financially independent right now instead of having to wait another five years.

When did you sell the home in Seattle what year? This was, we actually put it on the market in 2020. Actually, no, 2019. But it didn't sell. We didn't actually close until March 11th of 2020, right after COVID. And I was like, I hope it's like, I hope they don't back down. Like, that was really stressful because also we had already put a contract on a home here in Virginia. So while I qualified, right.

Because qualifying is easy. You know, getting approvals for stuff is easy. I found that out. Just because you qualify for two mortgages doesn't really mean you can survive on two mortgages or pay for them if, you know, if you don't have a handle of your cash flow. If you don't really know how much is coming in and how much is going out, I found that the highway. We did spend about a month or a month and a half, two months with both homes because we closed in our current home in January. So February and March, I think, were the two months that I ended up paying two mortgage payments. And luckily, it did sell in March.

Otherwise, I don't think we would be having this conversation right now because I would still be learning from my mistakes. So you're in March or April of 2020. Pandemic is raging with that. And I'm sensing that a turning point is coming here. Yes, it has to, right? We're running out of time. So it was actually in 2019. When we decided to sell the home and come back to Virginia, we actually drove back during Thanksgiving.

And we stayed with friends while we were looking for homes. We were not going to do the FaceTime anymore. We're like, no, we're looking for homes in person. Learn from that mistake. So we were staying with friends. And there was one day where I was just like started looking back. at everything that has gone through. And out of the blue, like, I start thinking, well, you know,

what am I going to do when I retire, right? Like, am I going to, do I even, am I even on track to retire at 67, which is my retirement age, full retirement age? So I take a look at my accounts and I started looking at the money and, you know, I'm messing it out at that point. I didn't really start messing it at the beginning because I had no idea that that was a thing either. And also, I didn't even have enough money at the beginning of my career to even put towards retirement and pay for the wedding.

But at some point, I started contributing to my 401K, and I had been maxing it out for like a couple of years. But there's not, there wasn't enough money there, right? So I started, I actually stumbled upon financial independence while I was looking on, you know, how much money do I need to retire? And I'm thinking, you know, how much money do I need at 67 for me to retire? And then I saw a video of, you know, yeah, this is what 401k should look like based on your age, blah, blah, blah. And I noticed, and if anybody hasn't, you know, the more you see a topic in YouTube, the more videos about it that you start getting in your feed as suggestions. So one thing led to another. I start looking at, there's this couple that I heard about, you know, they retired in their 20s.

I got, that's like, that's the headline, right? became financial independent and retired in my 20s. First thing that came to my mind was, well, what kind of money did you inherit? Right? Because there's no way. There's just no way. So I started watching that. And while the lifestyle was probably not something that I could have done, I started thinking, okay, you know, this is achievable, right? It doesn't matter. I can see that there doesn't matter the level of income, like financial independence is achievable. And that's when I started realizing, like, that's going to be my goal, right? My goal is going to be to become financially independent. So now I had a goal. I said, okay, well, now I need a plan. Like, how am I going to get there?

Right? So I start looking at, you know, if I want to not only become financial independent, but also stop working or at least maybe move to a more rewarding, less stressful, but potentially lower paying job, you know, what do I need to do? Where do I need to actually put my money? Because you know, 401k money, you can't really touch until 59.5. Well, if I want to become financial independent at 50 or 55, what am I going to use for that gap between that time and 59 and a half? And at that point, all that money that I mentioned my wife was keeping in another account had grown to about 150K, but it was standing on a high yield money market, 0.3% interest, which was not really giving us much. And I, you know, all the videos that I was seeing were about people investing in

the stock market, you know, ETFs and whatnot. I had no idea what any of that was. My first encounter with the stock market was, I think back in 2004, when somebody from work, a friend of a friend from work, said that this one company was supposed to be doing really good in the coming months and that the price was expected to go four times what it was. So the only thing I did is I bought, you know, I opened one of those brokerage accounts. I don't even remember which one it was. I had about $5,000 in a, like what then was my emergency fund. And I said, hey, it's supposed to go three, four times what it is, right? So let's go at it. I put the money there. Two weeks later, the stock goes down. Turns out the company was actually going bankrupt. I don't. I don't.

didn't do any research. I just was going on what this friend of a friend told my friend, who then told me. Obviously, the stuff, you know, 5,000 turned into 3,000 in two weeks. I freaked out. I sold everything. I'm like, this is like, I'm not touching, like, I'm not investing. I'm not dealing with the stock market anymore. It's a really quick way of losing money. And I think the problem there was the fact, obviously, one, I wasn't knowledgeable enough to either know what I was doing. And two, I was using money that had no purpose being in. invested, right? That was my emergency fund. And what I was seeing was my emergency fund go from $5,000 to $3,000. So I panicked. And I was like, well, I don't want it to go to zero.

So I just got out. But now I'm going through all these videos and all this information. And I'm, you know, I figure out what I don't know. And that was a B key. Like there was, there's so much things that I just didn't know existed, right? So I just started learning, you know, going into investopedia, checking out, turns out my broker's account has a couple of webinars just to teach you, you know, how do ESPPS work, how do stock purchase plans work, how does different, like, what are covered calls, cover puts, all of that information. Like I, I just thought the stock market were companies, right, you know, having stocks. I didn't know index funds, mutual funds, none of that. So I started learning, you know, and that's basically what happened between end of 2019 to date.

Like, I'm still learning. I'm still following podcasts. That's how I found you guys. And what was so inspiring from you guys was all the stories of everybody else that, you know, were very similar to mine. I mean, even the last two that I heard from the last two Mondays, it's like I was hearing my story through them, right? Now, I think fortunately for them, they learned at a younger age than me. But nonetheless, like, you know, I think I'm to the point where I've actually identified what. what my goal is going to be, which is become financial independent by December of 2026.

I've created my plan. Like, I know what I'm doing with the excess money. I've corrected all the mistakes. I've learned what it entails to sell and buy a home. It's not just how much you're going to put down payment. You know, it's closing costs. It's agent fees. It's repairs, right?

It's cheaper to repair something than to buy another one, right? If something is wrong with your car, yes, it might be a lot this month, but it's not the same as just extending your car payment for another five or seven years. And it's probably going to be a higher car payment, right? Prices are only going up. So every time you get a new car, unless you're going from a huge SUV to a compact car, chances are you're going to be spending more every month on that new car. it was just my excess money after covering what I call my essentials, you know, housing, food and insurance and utilities, they didn't have a goal. They didn't have a purpose. So I was just like, what do I do? And I was just chased the next shiny new thing. Now my goal is become financial independence. So now that money has a job and that is, you know, get invested, right? Go into dividend paying ETFs, go into index. funds. And then I'm projecting, I'm a pretty big geek. So I created my own spreadsheet. Being in IT, being in the security space, I don't trust really using like those tools where you

have to link your accounts, your bank accounts to it, just because I don't feel comfortable. Just putting in that information there, I started to create just my own. I have no problem keeping track of that. So I projected, you know, taxes. I projected everything to figure out when can I become financial independent? Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening.

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assuming you don't have superpowers. I'll never work again if anyone found out. My lips are sealed. Marvel Television's Wonder Man. All eight episodes now streaming, only on Disney Plus. So I have a couple of things I want to point out here. So first, you had a great career, and you were investing to a certain extent prior to this revelation in 2019 with a couple of those things. So you beat yourself up a lot, but I think there's a lot of people who are in much worse positions than you.

And I don't think you did everything wrong. I think you just didn't have these mental models around financial independence with that. So I just want to say, hey, this is this has been a fantastic story. And I think that you're doing, it sounds like doing a lot of the right things here with this. You don't need to beat yourself up quite as much as you are with some of these things. Well, yeah, I mean, it's just the fact that had I even known of the financial independence possibility sooner, right? I could have probably course corrected, you know, I don't know how many years ago. It was just that it was just the fact that I came from a different background, different country growing up, different culture, and not really knowing what was possible just what I would see everybody else doing and thinking that's what I was supposed to do.

That's the problem, right? Is, you know, for whatever reason, I stumbled across financial independence. I'm comparing myself to you with this because that's, that's, we all have to do, it can only do it from our personal experiences to subagree with that. But like I discovered this at 23, you know, making 45, I was making $48,000 a year at my first job, right? So you were a much better position upon graduation than I was with a lot of those things. I just happened to stumble across Mr. Money Mustache and the mad fiantist and bigger pockets and a couple of those things. Then and what an advantage there. And that that completely allowed me to have all my dollars go to a purpose and not accumulate debt in those.

types of things. And that, I think, is the thing we need to remedy and why I get so excited about what we do every day at bigger pockets of this is because if you can enable that for more people early in life, you can have all of these things coming forward. And I think it's just so powerful for you to share this story because people can hear that and say, great, you know, when I'm starting out, let's let's not do some of those things and let's pivot. And it's not too late at any point to go ahead and do this. You're, you are, not very far away from reaching five, even after this, this, what you, what you kind of seem to think as 20 years of, of, of, of, of, of, poor decisions financially with a lot of these things. So I, I think it's, I think

it's very powerful to hear this. I don't think you did a lot of things wrong. I think the fundamental problem is not that you made bad decisions, but that for whatever reason, the frameworks about how to be successful financially are not widely available still. and are and and that's slowly changing but how do we how do we change that as a society for all new workers high school graduates those types of things that folks have a playbook that can lead to success and frameworks yeah i was going to see you introduce everybody you know to the bigger pockets money podcast go ahead share this with everybody that's right yeah that's not self-serveing at all i mean yeah that's exactly what yeah it's funny you actually got you mentioned that because i we don't have any

kids, but a lot of friends do. And I started asking them, they're like 14, 15 years old right now. And I started asking, what do you want to be when you grow up? And the first thing that they, that they answer is, oh, I want to be a doctor because they make a lot of money. Or I want to be a lawyer because they make a lot of money. And I was like, okay, but I didn't ask you what you wanted to work on. I asked, what do you want to do? And it was just, like, I could see myself in them answering the same thing. Like, oh, I want to do, you know, this career because it makes a lot of money. Like, the goal is still, you've got to make a lot of money.

It's not really managing that money. Because it doesn't matter how much money you do. If you don't manage it properly, I mean, how many, how many, like, super sports stars, you know, go broke after a year or two when they retire or they get injured? Everyone. Because they're not, they're not, well, there's some, there are a couple of a half of them. like Jordan, Magic Johnson, you know, but they, they manage their money, right? They don't spend every dollar that comes in.

And obviously, I'm not making anywhere near what those guys were making, but if all the dollars that come in, go out, and maybe even a few more and you start getting deeper, deeper in debt, it's just a never-ending cycle there. And the other thing I want to point out is that when you discovered this, it's at least an 18-month deep dive that you've kind of gone down the round. rabbit hole since 2019 with this. And during that time, okay, wow, the kernel begins at some point. You're like, oh, that's, that sounds interesting. I'm going to explore that. Then the rabbit hole plunge and then behavior changes simultaneously as you're developing frameworks because

nobody has a complete mastery of the financial journey at first with this. You don't know what that between a Roth and a 401k, you might know it, but you don't really fundamentally understand it and have a reason behind what you're doing until time goes by and you really get digested over time with that. I mean, just three weeks ago, just three weeks ago, I learned about Roth conversions. New tool. Right? From Roth, you know, traditional IRA to a Roth IRA.

And I was like, oh, well, that's interesting. Like, it doesn't make sense now, but maybe like the first year that I retire that I'm not going to have earned income, that that's probably something. get to look at, right? That happened three weeks ago for me. Oh, let's go a little deeper in that. So the Roth conversion ladder, once you take it from the traditional and you convert it to the Roth, you're paying taxes on that. In five years, you can access those funds. So you need to be thinking about how am I going to live from the time I retire till the time I can get those five years, the funds after five years. So that's another thing

to look into. And the mad scientist has a really great article. I'll send that to you about the Roth conversion ladder. It'll give you a lot of step-by-step information on that. And we had, we actually had the mad fientist here on the BiggerPockets Money Podcast on show 161. That's BiggerPockets.com slash money show 161. I've heard every single podcast from you guys. Like that's what I hear when I'm driving now or when I'm walking or biking.

Like, it's what I do. It was so funny because I was, we went on a short three-day weekend trip with my wife. And he got to a point where she's like, can we hear music just for a little bit? I'm like, sure we can. That was the other thing that I wanted to mention, right? So me learning about the ability to become financial independent, like I had to, talking to my wife about it was not like her going, oh, yeah, let's do this, right? because her history with us of 20, 21 years was, yeah, right.

Like, you know, we can barely save any money now, right? So it took me a while to have us both on the same page, let alone the same book, when it comes to becoming financial independence. I had to, you know, I showed her my spreadsheet of, you know, this is what we have now. This is how much income we're getting. You know, this is how much we're spending. Are you in agreement? You know, do you agree with everything that I've shown you?

And then I did, you know, the 4% rate of return projected over X number of years. You know, if we start saving, you know, the bonuses and all that, you know, this is what it looks like in, you know, in five years, in 10 years. And when you saw that, she was like, I don't believe it. And I'm like, that's the magic of compound interest, baby. Like, you know, if you understand them, you earn them. If you don't, you pay them. So now we understand them. Now we're putting compound interest to work for us.

So it's just, it's just now we're. have a goal now we have a plan we've got to act on that plan to achieve the goal well let me let me let me go back one second here and say we're talking about in 2019 you discover the rabbit hole you go really deep wow you know 200 episodes at bigger pockets money who and all these tools are coming in one by one as you're absorbing this information right and the playbook is in under construction at first with that how what what can you can you walk us through some of the big changes that you made here i mean you're starting with some retirement accounts. I imagine a lot of debt in various different areas, but 150K in the bank that you haven't

touched. You're getting your wife on board. What are the big moves that you begin to make? And what does your position look like today? So I think we actually, we were at the first, the first year that we had no debt other than the card loan and the mortgage was 2018, beginning of 2018. We did at some point, ended up just paying off the credit cards. Like, that was the goal at that time, and we did it.

But then after that, it was like, now what? At work, there is a community. There's a group within our work that just talk about investing. So I decided to join that group and just start reading the post and learning. And a few of them, that's where I learned about ETFs. So I started researching. I did invest a little bit of money in an ETF that, that paid about 7% in dividend income.

And I'm like, I'm just going to put like $1,000 and see how that works. Like, I still had my, you know, 2004, 2005, you know, experience in the back of my head. I'm like, I don't want that to happen. I'm just going to put in $1,000. You know, if it goes down, okay, it's $1,000. It's not, you know, my entire emergency fund. And it started growing. So this is back in, I want to say,

just a couple of months after COVID hit, like probably May timeframe 2020, when I put those thousand dollars there. And I just thought, you know, because it was dividend paying and I had to reinvest those dividends, you know, it just kept growing and growing. And then the price of the ATF started to grow as well. Luckily, the dividend payment didn't go down. So the yield did go down, but that's just because the ETF price was coming up. And it's closer to November now, November 2020, and I tell my wife, like, look, look what's happening. Like, you know, this is, this is working out. By that time, I've researched more ETFs, more index funds. You know, I've been tracking them for, for the year, thinking I don't really want to invest any money right

now because I don't know where COVID is bringing things, even though it started to go up. Like, I'm, you know, I'm not sure if it's going to continue to go up. It's going to correct. What are we going to do? But it's November, December timeframe 2020. And I tell my wife, like, I'm, I'm not, I'm I've made more money with $1,000 in the CTF than our 150K money market has done the whole year. Like, are you okay if we move some of that money over? Like, let's not move all. Let's maybe move 50K and see how that works out. So we do.

And then it starts, you know, we start noticing the growth. I mean, just going from $1,000 at 7% yield to $51,000 at 7% yield, that jumped, you know, right off the chart. and then you start reinvesting that. It just keeps growing and growing. And now my wife's getting excited at what she's seeing, right? And she's the one who says, well, how about we move more money into the investments? And why didn't you find about this sooner? And I'm like, I don't know.

But I'm glad I did now, right? So what we're starting to do is we still have, you know, our emergency fund. And I actually like to call emergency fund is one thing. And then I have my rainy day fund. So my emergency is cash that I need to pay today. Like right now I have the money like I have the money. I'll pay you if I need to. And then I also have six months worth of what I call my essential expenses,

which is essential utilities, insurance, food, and housing. And then everything else, if that is covered, everything else goes into either an ETF index fund. It gets invested. It gets invested. The nice thing about having your emergency and your rainy debt fund covered, is you leave emotions out of the house when it comes to investing. On a day where it drops, you know, after the Fed announced that we're probably raising interest rates in 2023 and it took a dive, I was okay with it.

In fact, I was kind of upset. I didn't have any more money available to invest and buy under dip, right? Or what are at a sale price? I'm like, man, if I only had a little bit more money that I could put into it, right? Before I would have been panicking, just selling everything and, you know, trying to keep my money. I had no emotions anymore. Like I had a goal, I have a plan. I'm sticking to it.

Like, I'm following through. So that's basically what we turned into. And yes, like the spreadsheet that I talked about, like, I know, like I have my two buckets. I have my brokerage account, which is where our money is going to come from the day we decide to stop working until we turn 59.5. When we know now we can tap into our IRAs for one case. We are thinking about transferring from traditional IRAs to Roth, IRAs, but not until we stop making or earning income so that we can potentially do that at our lower tax bracket, because we do have, like Mindy said, we do have to pay taxes on that transfer.

But then from there, all that growth is, you know, is free. And our plan is we're planning on spending that money last, right? As long as we're in a low tax bracket, we're taking taxable money out of our accounts and letting the tax-free money keep growing. as much as they can. So can you walk us through how you think about using tax advantage accounts and what your order is? Like, for example, do you take a company match and then ESPP or what do you do there? Yes. So, so I took a match. I take a match on 401K. My company actually gives you 50% of any amount that you put in. If you max it out, they put in 50% of the max contribution. So I do, I do the max. I know.

It's great. My previous company is they would only do, up to 3%. So if you do 6%, they'll do 3%, and that's it. That's their cap. My current company is 50 cents on the dollar, as many dollars you put in. Obviously, if you maxed it, they put. Wow. Do you have a Roth 401k and a 401k? We have, so we have the ability to do a Roth after tax contribution. It's really, it's really a pre-tax contribution to a 401k that then gets converted to a Roth 401k every day. I'm not, I'm not doing that right now. I've gone back and forth on it. I've looked at the numbers.

I don't think it really makes sense for us. Because of the options that we have in that 401K, I think it's better suited to take that money and just put it in the broker's account for now. But I do want to do the RR IRA. We do have an IRA from when I transfer jobs. we just put that money into the IRA. So I am planning on transferring that money, you know, to the conversion once I stop working so that I'm in a lower tax bracket.

But yeah, we've looked at the Roth 401K. I just, it doesn't, based on the numbers that I'm getting, it doesn't really make a lot of sense to do right now. So we've got a phenomenal 401K match and benefit that you're taking full advantage. I love it and great explanation there. What's the next thing you do with the money after the match? So we also have ESP, employee stock purchase plan. We get a 10% discount on that. And I think the limit is up to 22,500 that you can contribute towards it.

So it's really 25,000 of purchase price. So that includes the 10% discount. So you can really only contribute 22500. So I try to do the max out. Just that's 10%. Hallelujah. Thank you. That's awesome.

Love it. Yeah. So that's 10% right there. Yes, if I do sell it, yes, I do have to pay taxes. Yes, it's going to be a short term. You could just dump it into an index fund and you pay a little tax. Exactly. I'm okay paying, you know, the 22%, 24%, whatever the bracket it's going to fall into in taxes,

knowing that it's just going to continue to grow. Because I also, like, at the beginning, when I joined this company, that was the only place I had money in my broker's account was the ESP, right? But it was a single point of failure the way I see it, you know, being. in IT. You're always thinking single point of failure. So I do have some shares of that, or I try not to keep a lot, just, you know, as soon as I can, my ESP, rebalance the portfolio, going to index funds, going to ETFs, just, you know, diversify a little bit. All right, what next? That is, I think that's it. We don't qualify for Roth IRAs. By the time

I learned about Roth IRAs, we were over the income limit for Roth IRAs. So we can't really contribute to them. But it's really just the brokerage. I mean, like I said, anything extra. Now the way we see it is we have to, I mean, I'm sure everybody here knows about the 72 rule, right? The amount of time it's going to take to double your money. Well, I have another 72 rule and that is the amount of hours. I'm going to wait before I buy something. And the way I see it now is, is this object or thing that I'm buying, is it going to work for me? in the future, right? Is it going to, whether it's an object where it's an ETF, like, is it going to work for me in the future? It's going to make me a better life, or is it just something

that I really want right now, but I don't really need? So that's why I'm giving myself 72 hours. Mindy, I know in the last shows, we've talked about Amazon Prime and free delivery. It's so easy to buy a Nazi. I mean, it's like a credit card, right? Your phone is a credit card for Amazon right now. So I wait, seven, two hours. I put it in the card. I actually move it to save it for later, just so that I don't mistaken click to buy it now. And then three days later, I go, okay, do I really need it? And if I do, okay, then I'll buy it. And if I don't, I'm like, well then, you know, let's move on and see how much money that was going to cost me and maybe, you know, set it aside for my next deposit into my broker's account. We're going to call this Saul's rule of 72. Yes.

So, yeah, that's, I mean, that's what we're, that's what we're doing right now to try to, we're trying to put more of, is this going to work for me? And I can't remember if it was who it was, that said, you know, people who have wealth look at buying things that are going to make them wealthier, like that are going to make them more money, not, you know, that's why they made the comparison about people who, who go on vacation and they buy, you know, the little fridge magnet and what have you, like the little, remember me, remember the strip type souvenir. And he's like, yeah, like wealthy people don't spend money on that because that does not

make them any money in the future, right? So I start to look at things like that. I mean, I still buy the magnet because it's a nice souvenir. Who knows when I'm going to be able to go to that place? But now I'm thinking about it, right? I don't do it mindlessly. Like, I know now I have a plan and I know how this action is going to affect that plan. But I analyze it and I determine, you know, can I do it or should I put my money somewhere else?

Like, where's the best place for that? What is your household spending changed from on an annualized basis or monthly, however you compute it, from before to now, whatever you kind of defined before as? Well, so that's a tricky question because before we weren't really tracking it. And it's funny you mentioned that because there was an event that I do want to touch upon slightly. In 2007, when my wife was still in the mortgage business, she met a financial advisor. And we met with him. But he just wanted to sell a specific product. Like, fiduciary, he wasn't a fiduciary.

And the one exercise that we went through was your income versus your expenses. And I had no idea how much money I was spending, right? I mean, I went with what I thought it was. And he goes, okay, well, according to this, you should have $20,000 by the end of the year. you know, where are you putting that money? And my wife looks at me and she's like, yeah, where are you putting that money? I'm like, there is no $20,000. Like, it doesn't exist, right? That's when I learned, like, I had no idea how much money I was spending.

And I did start tracking it for a while, but, like, there was no purpose for me to do that. Like, there was no goal. Okay, I'm going to be spending it for what? Until I started reaching five, that's when I started noticing how much money I'm spending, right? So we are, I mean, we are pretty high up there, not counting what we're saving. probably spending anywhere between $7,000 to $8,000 a month. That's including mortgage, you know, transportation, insurance. It is a pretty high cost of living area. But we are more, I mean, the biggest delta on month to month was definitely online shopping and eating out. Now,

I know I'm probably going to sound horrible, but COVID forced us to say. more money, right? If there was anything good that came out of it was it forced us to save money because we couldn't go out. We couldn't go out and spend money that we were, I mean, we were easily eating out two to three times a week and not looking at how much money we were spending, right? Credit card, just sign it and go. Like I never really looked at, oh, I spent $50, right? And then two days later, I spent another $50. And then at the end of the month, like $1,500 in eating out, that you're thinking, oh, I'm just spending $300 a month in restaurants. No, you're not.

You're spending five times that. You're just not tracking that, right? So I am doing my cash flow now. Every time, like every month, I look at my statement and I compare it to the month before. And I go, okay, that means that I should have, you know, an extra $200 that I can put into my broker's account and put it into, you know, spread. across my holdings. That's something that I didn't do before. And every month I'm trying to make it better.

Once I finish paying the car, that's going to be $700 that are going to go every month into that broker's account, right? It's now, it's the combination of having a goal and a plan and the tenacity or ability to follow it, right? That is motivating me just to keep going, right? Because back in 2007, with that financial advisor, I have. no motivation to keep going. I actually felt that as an attack from the financial advisor towards me of, like, you don't know what you're doing. And he was probably right, but,

you know, I wasn't looking to being called out on it, right? Now it's on me. Like, I'm the one that wants to do it. I'm not being forced by anybody else to do it. I want to do it. And because I want to do it, I'm putting the effort on it, right? I think that was the biggest difference. Just having that goal, like, like, like everything kind of clicked in 20, 19, like every single thing is like, oh, now I know this, now I know this. I can do, like, you start learning more and more because now you have a goal. Now you can see that it is achievable. Do you see the other examples of everybody else who's working on it or who have done it?

And you're like, yeah, this is, you know, we can do it. We just got to stay focused on it and not lose track. I have nothing to argue with on all of that except your monthly spending. But all of that is absolutely right. until you're ready to make these changes. You're not going to make these changes. Nobody can make you do this. You have to be willing, ready, willing and able to do this. And now you are and that's fantastic. So you did just casually mention that you spend $8,000 a month and you live in a very high cost of living area. So I'm not sure how much lower you can get that. But I am going to challenge you. And it's not

my business, but I'm nosy. So I'm going to do it anyway. I'm going to challenge you to track your spending in an every single dollar manner. Make a spreadsheet. Get a notebook. Get a notebook. and just write down every single thing while you're doing it, not at the end of the month when you go back and review while you're doing it while you're in the month, write down what you're spending. And maybe there's not that much to cut. Like you said, it's a very high cost of living area, the D.C. area. But maybe there is a little bit here and there that, oh, here's an extra $50 that can go into my brokerage account.

Here's an extra $100 over several things. You know, go and reevaluate your insurance costs. what are you spending on your home insurance and can you increase your deductible a little bit to reduce your monthly payment or your annual payment? Same with car insurance. A lot of people, I think the default is $100 deductible on car insurance. Well, what is that going to pay for? A new windshield wiper, that's not going to pay for anything.

But your premium is much more expensive than when you have a $2,500 deductible. If you have a, and you know, you have to have full coverage because it's still financed, but can you increase your deductible because you could weather that hit, that $2,500 hit versus, and then now you're saving the equivalent of, you know, $500 a month on, or I'm sorry, $500 a year on your insurance. Maybe you're a really great driver and you'll never get in that kind of car accident where you have to pay $2,500. So, you know, there's a lot of things to think about what kind of internet do. you have? Do you need that great of internet? Can you get a different plan? Do you have more providers than just the one? In my city, there's two. One is Comcast and one is the city itself. And the city's like, hey, for a dollar, we'll give you super fast internet. And Comcast is like, hey, for a thousand dollars, we'll give you super slow internet. So it was an easy choice for me. It's not quite that big,

but it is pretty big. Longmont has fabulous internet. Hooray for Longmont and your wonderful internet. But there's, you know, there's, there's, who is it? Jay Money on Budgets Are Sexy did this thing called the Challenge Everything Challenge, where you go and you review every single expense you have and you challenge yourself to get it down lower. And, you know, saving $10 over the course of a year is not super amazing, but it's still $10 in your pocket. That could be, well, now it's in your brokerage account, earning, earning 7%. That's right. And in eight years, is going to be $20 on its own.

Well, I have another question here as well. Mindy, and you actually brought this up in our show notes here. So I'll give you credit for coming up with the question. But, you know, you said you spent, Saul, you said you spend $7 or $8,000 a month, which is, you know, between $85 and $100,000 a year. So if it's $100,000 a year, you would need $2.5 million to retire on that,

according to 4% rule. So I would love to know kind of what your plan entails for you to get to buy by the end of 2026 as you've kind of. So yeah, so we're not going to reach, we're not reaching the $2.5 million. However, I'm focusing right now on the brokerage account, which is paying a significant amount of dividends. It's an average I'm getting, as of yesterday, because I haven't looked at it today, I'm getting about 11.5% yield on all my hold. that is cutting the 4% rule. I would only need 2.5%. So that's what I'm basing it on.

So I'm using the dividends or that income that I'm going to be receiving from either dividend ETFs, dividend stocks, mutual funds that are paying those dividends to offset that 4% rule and then not need the $2.5 million, but need more like maybe one, one, one, and a half. And then the, it's like a combination. Like, I'm not looking at having the amount of money in one single place, right? So I'm also, I'm keeping track with my contributions for my 401K. My ESP is also keeping growing. So there's, there's always more money going in. It's just getting spread across. So in five, six years, while I'm not going to get close to the $2.5 million

or actually meet it, it's going to get pretty close. What I'm looking at is how much money do I need in that brokerage account? Because that's where the majority of the money is going to come between, you know, if I decide to stop working altogether and 59.5. Or the more I think about it, the plans are changing like every month. The first month, you know, it was after a really bad day at the office or at work. I'm in my office right now. And I was like, I'm done.

You know, I can't wait to be five, so I just stop working. And then later on, I was like, like, well, you know, I could probably still stay in IT, just, you know, work for the county, like the local school, county district, lower paying job, but, you know, I still have, you know, I'll still have some sort of health coverage. At that point, maybe I can start, you know, adding money to a Roth IRA at that point, you know, take a lower paying job. So the nice thing about it is I have options, but right now, right now the goal that I see is, yeah, if I keep the way I'm going right now for the next five, five and a half years, I'll have

enough money to cover, you know, pretty much forever at the current expenses. Now, my expenses will go down once I do finish paying the car. That's going to be significant. So that's going to be about $750 that is going to go down per month. And then I do have, as far as the home, we are planning on moving to a more affordable location because I don't really need to be closer to D.C. anymore. So we can move farther or way. We're still within driving distance to see our friends, like maybe just an hour, an hour away, but it drops significantly, like it drops like 30%. Right. So, so we're not going to be, right now I'm planning as if I were staying in this house with my

current expenses, which is definitely not going to be the case in five years. It's going to be significantly lower, but I rather have that extra cushion in place. Love it. So you're going to reduce your expenses and you have a very high yield investment. or that you believe in with that. And, okay, what are you investing in that is earning 11.5% yield? Let's see, I'm investing in QYLD, which is a cover called RYLD, XYLD. They're all cover called ATFs. Can you explain what these are?

So the QYLD is they're all covered called ETFs. They follow a specific index. So one of them follows the Russell index. The other one follows the NASDA. index and the other one follows the S&P 500. So it's, I mean, without getting into the details. It's basically, it's similar like an index except they put an expectation on a price. And because of that, there's a fee that goes with that. That's where the cover call comes in. And that's where the dividends come up, come out of. At the same time, depending on the holdings that

those ETFs have, you know, if the prices of those companies go up and down, that's how the ETF behaves as well as far as prices. I also have a fund, a couple of funds, CLMs is one of them. My real estate investment comes in the form of REITS, Real Estate Investment Trust. I just don't like dealing with tenants. So that's how I do real estate in REITs. I'm ignorant of QYLD, RYLD, XYLD, And the strategies behind that, I'm familiar with the concept of a covered call. Where can I go to find out more? And where can listeners go to find out more about these strategies and read about them? I mean, what I do is I just go to Investopedia.

I go to any website that offers you information on any company like dividend.com is one of them. You can even, if you go into your own brokerage, just look up the ticker, you know, Q-Y-L-L-D. It'll give you all the information, you know, what the holdings have, you know, what the earnings per share, all of that technical information that you can then decide, you know, if it makes sense for you or not. Okay. And then lastly, this, this, with a yield like this, I'm assuming that's your dividend deal. That's your income you're reproducing. So I have $100,000 making $11,500 per year in dividend income in the strategy. That is going to be taxed at as ordinary income. Correct.

Are you doing this inside of a retirement? account or are you doing this in your brokerage account? No, right now it's going in the brokerage account. And I know, like I know it's going to go really on top. So whatever tax bracket I am right now, it's going to get hit at that tax. But it's something that for me, it makes sense. It's not available inside a 401K. It's not available unless I do a broker's link account on my 401K, but that involves fees.

And the fees really outweigh the benefits of, you know, the tax savings at that time. at least from what I saw right now. So right now it's going on the brokerage account. And I'm okay with it as far as paying taxes right now because my plan is get to a point where those dividends are high enough that I can cover maybe 50% of my current expenses. And I know that money is, you know, it's getting taxed at 22, 24% right now.

But I know it's there, right? And I don't really need that money now. It's just it keeps getting reinvested. It keeps growing. Sure, I'm going to have to pay more taxes on it. All I'm going to end up doing is, you know, two months at the beginning of next year, I just won't reinvest that money and I'll use that to cover taxes. But in the meantime, it just keeps growing. It keeps growing. And it's going to grow to a point where, you know, I can now stop working. And now of a sudden that income is going to bring me maybe to the 12% bracket. Okay. So, yes, like, I'm aware it's probably not tax deficient right now. but it's getting me to the point where it makes sense, you know, five years from. You're comfortable with five. Yep.

Okay. So this is also new to me. I, the more I do this show, the more I realize, I don't know, to go out about this, and I always thought I knew quite a lot about this. But I want to ask the people who are listening right now, if you have experience with covered call ETFs and maybe some tips for maximizing returns, we're going to post a question in our Facebook group at Facebook.com slash a group. slash BP money asking this question. Please share your information and tips with us so that we can all

learn more about covered call ETFs. And also covered calls, I know just enough to be dangerous. There's more volatility than just owning something and holding on to it. So if you have any tips for things to watch out for or cautionary tales or anything like that, I really want to learn more about this covered call ETF that sounds very, very interesting. Thank you, Mindy. I think that's a great. idea and I would I would love to learn about that as well I'm I'm not sophisticated enough to comment and tell it more intelligent on this and I would love an education from our our community on this in addition to the research I'll do shortly after the show so I love this story

this is what a phenomenal pivot in the way you think about money and a sweeping set of changes that you've enacted over the last year or two with this and you're off to the races in terms of moving towards buy and you've got a whole bunch of incredible frameworks a plan as you've you've said a plan for every dollar is going to go um i have two i've one one last question with this which is around um sounds like you had to you you kind of dive down the rabbit hole a little bit first with by it had to kind of educate or bring your wife along to to kind of join the same mentality with this and there was a bit of a proving stage to that can you walk us through that and also um can you let us know if your wife is working here uh at this at this point

time. Sure. So, so yeah, it took a while to, uh, to just get my wife on board, right? Not, not necessarily on board, but have her, you know, think that this was even possible based on the last 20, 21 years. She didn't, at the beginning, she thought I was crazy. Like, there's no way. Like, you know, there's, we barely have money saved in the bank right now. Like, there's no way. We're going to be able to become financial independent early. But like I said, like, we went through the plan. I showed her to spreadsheet the projections, you know, what was possible using conservative growth estimates based on, you know, the previous 20 years of stock market and, you know, the 401K and all of that. And then I just showed her when 1% difference was on my 401K balance. And she was like, how is that possible, right?

I mean, it went, it just went crazy, right? And I'm like, you know, interest. So at that point, she's like, okay, like, let's do this, right? So she is working. She's working part-time for the local county school system. She's working part-time, so she doesn't really have any benefits. So I'm the only one that can, you know, cover into a 401K. But now it's funny because now she talks about her salary as, you know, as she's bringing in her own dividends, right?

Like, we're focusing on dividend investments, and she gets paid every two weeks, and he's like, oh, this weekend I get my dividends, you know? Are you going to deposit them? Where are you going to deposit them? How much dividend yields is that going to give us? So, like, we're both on board. And that makes it super easy because now it's easier to have conversations about money because we're both on the same page. We're both following the same goal. I love it. I love that you showed her what was happening. And now she's so excited about it. That's the, this is such a great end to this story because it started off really with people preying on your lack of knowledge. And I don't say that to be mean, there's plenty of people who grew up in America and don't have any more knowledge

than you did when you were first starting or don't have any knowledge as much knowledge as you have now. I think that being hungry for it and really wanting to better yourself is going to be the big difference in achieving financial independence and just, oh, that'd be nice to have. And then never doing anything about it. You took action and that's fabulous. Oh, I love this whole story. I can't wait to see what happens to you in a couple of years. Yeah, me neither. Well, I think we've reached the point in our show where we get to the famous four. Saul, these are the same four questions we ask of all of our guests. Are you ready? I am ready. What is your favorite finance book? So that has to be your money or your life. I can't remember which step it is, but it's that

the step where you, she makes you go through your earnings throughout your career and then you have to see what you have to show for it, that I realized, oh my God, I made, like, if I combine all my income and I really don't have much to show for it when it turns, when it relates to becoming financially independent, right? Like, I started thinking where did all the money go. So that was, that was one of the key things that kind of lit that light bulb on. Yeah, that sounds like a scary step. Yeah. Well, we really are big fans of that book as well, and we actually had the pleasure of interview.

And you've already listened to all of them, you said, but for those listening, we actually interviewed Vicki Robin on the episode 98 of the Bigger Pockets Money Podcast, the author of your money or your life. And you can go check that out at BiggerPockets.com slash Money Show 98. What was your biggest money mistake? Well, since there's so many to choose from, really, I think really the biggest mistake was not understanding the consequences of the actions that I was taking, right? Not understanding the consequences of keep financing a new car every two to three years or selling and buying a home just because I felt I was spending too much money on repairs. It was just the fact that I was just going through the motions, just following the flow, instead of really understanding. understanding, you know, what consequence, what consequence financially happened to, you know, put a high purchase item on a credit card, not understanding what the impact of that.

I think that was really the biggest mistake. I think we never heard it articulated like that, but lack of knowledge or ignorance being the biggest mistake, I think is a phenomenal way to phrase it. And that was the root cause behind all of the problems you had. And that has now been resolved and you're off to the races with this. So I think it's a really smart way to put it. Thank you. What is your best piece of advice for people who are just starting out?

I think it's a combination. I think it's really a three-step approach. And first is you need to have a clear goal to find. And I think this applies for everything, not just financial. Like, you know, you can apply losing weight. you need to have a goal, you know, be financially independent in 10 years, five years, whatever it is, and then start working on your plan. And obviously, that plan is going to involve understanding your cash flow because you're

not going to be able to take action on your plan, which is the third step, take action on the plan in order to meet that goal, right? Having a goal and having a plan by itself is not going to get you anywhere. You have to act on that plan. And then obviously, you know, you're probably going to have to make adjustments. as things change because things inevitably change. But I think having that goal, a plan, and most importantly act on that plan is what everybody should start doing. That was awesome.

Plan, measure, act. What a great. What a great. That's phenomenal. I'm stealing that. Craig Mark. All right. Yeah.

What is your favorite joke to tell at parties? Typically, I am the joke at the party. But I like to say, if you ever think you're kind of down, like nobody really cares whether you exist, try missing a few payments. You're going to become really popular really quick. Oh, that joke is a real credit to the show. Thank you. Okay, Saul, where can people find out more about you? So, like I said, I just started a YouTube channel recently where I kind of go more into detail.

as far as like my journey right now, all the mistakes I did, how it happened, you know, how I got out of it. And also as I start learning more, I kind of give a quick video of, you know, just like I learned about the Rothfire array conversion thing, I made a quick video about it. So it's in my YouTube channel. You can just go YouTube slash my first name, last name, all single word. Or you can just search for my space, FI, space journey. that should also get you to that channel. All right, and we will link to all of this in the show notes at biggerpockets.com slash money show 213.

That's another time. I'm giving that with all the links to the other episodes here today. But this has been fantastic. So before we go, I have one question for you, which is you've mentioned a spreadsheet that you use to show your wife, some of the power of this kind of stuff that really has your whole plan involved in that.

Would it be possible to, get that spreadsheet or a version of it that has redacted information or something like that to post to our file place so other people can maybe use that as a tool yeah absolutely i'll just clean it up a little bit make it easier on the i because um i started this spreadsheet took two years to build and i kind of just started patching it up so yeah i will i will work on that tonight well awesome and and and no need to uh do a lot there in that and and um we can we can edit this out if if you are uncomfortable with that at all. But I think some people might like that.

Yeah. Awesome. Saul, thank you so much. This was such a fun story. And I'm so, so excited for what the future holds for you. You are going to just crush it because,

A, you're thinking about it and B, you're taking action with the plan that you have formulated. And your wife is on board. That together, the two of you are just going to conquer the world. and I'm so, so, so excited for all the things you guys are going to do. I want to check in with you in a couple of years and talk about your journey from now until then.

I want to see, you know, what of your brokerage accounts done, what is going on with your job, your wife's job, all of those fun things. I'm really, really excited. I'm going to put a note in my calendar to reach out again in a couple of years. Yeah, sounds good. Okay, and we will talk to you soon. Thank you so much. Okay, Scott, that was Saul with my FI journey. And holy canoli, that was a long but amazing episode.

I love, I don't love everything about it. Like, I'm sad that he made all those money mistakes, but I love that he fixed it. And did you hear him say that he's going to be financially independent in six years? Like six or seven years after starting his financial independence journey? That's huge. That's phenomenal. I love it. Yeah, I mean, it's he's like he mentioned, I think that the biggest theme I heard was he had no plan and no reason to invest or save money, no frameworks behind that.

And just they were never presented to him. He never came across them with that. And it's not an intelligence thing here with this. It's a, hey, if you don't, if you're not like introduced these things, if you don't learn about them and discuss them and debate them and develop your toolkit with money, you're, you're, you're having. to invent a way to live life, which is just like, you know, it's almost impossible, right? There's very few people out there who, and it's like a stumbling thing, like, like, like Vicki Robin is an example of one of those few pioneers who figures this stuff out and invents it for herself to a certain extent, right?

And pioneers in movement with that, right? And it just doesn't happen, right? I never would, like, I never would have done any of this stuff or known about it if I hadn't come across Mr. Mollinger. Money mustache, the mad scientist, and bigger pockets early in that. And once you find this, once you kind of understand it, then you can act on it and form that plan and begin moving towards it. And it's immediate. And he's applying his considerable skill set and intelligence and abilities to this. And it's a five-year journey, even after 20 years of what I think he

described as financial mismanagement or mistakes that he was making. Yeah, you know, near the end of the show, he casually commented that he's planned. on living off of his taxable accounts while he's in the lower tax brackets and letting their Roth accounts, the tax-free accounts, grow as long as possible. And when he said that, I was like, well, yeah, wait a second. I've never heard anybody say that. I've never heard anybody put that into words. And I just wanted to make sure that those who are listening caught that. He's going to, once he has no income anymore, he can then start to take out of his accounts, that he will have to pay taxes on while allowing his accounts that he's not going to have to pay taxes

on continue to grow. And every time we talk to somebody, I learned something new. And that was something that makes total sense, but I didn't even think about before he said that. So thank you, Saul, for teaching me something because that is not, that is not something I ever thought of. I love that he has an emergency fund, money that he's going to spend, like totally liquid, can spend it today if necessary. and an additional six-month of expenses, rainy day fund. I love the way he thinks about these things.

And, you know, he did make mistakes in the past, but he's on his way to a very bright future. And we will absolutely refer to this episode in a couple of years when we bring him back to share more about his story because I have a feeling his story is going to sound amazing. I've been asked today for some of our listeners before we go, Mindy,

which is, can you please leave us a rating or review on iTunes if you are listening to the show or wherever it is that you listen to podcasts? Those reviews and ratings really help us out. And, you know, we often kind of forget to ask for folks to kind of update and populate those, but we really appreciate those and read everyone. So please give us one of those reviews on iTunes or wherever it is you listen to podcasts if you enjoy the show. Thank you, Scott. Yeah, I always forget to ask that.

But I agree. It would be lovely if you could review our show that helps more people find us and find the content that we're sharing. Okay. Scott, this was a super long episode and we should get out of here. Are you ready? Let's do it. From episode 213 of the Bigger Pockets Money podcast, he is Scott Trench and I am Indy Jensen saying happy trails.