BiggerPockets Money Podcast - 260: Finance Friday: How to Hit $10M Net Worth in 10 Years (Or Less)

Episode Date: December 24, 2021

Stocks vs. real estate is a regular feud among many financially savvy forums on the internet. While some investors love the passive aspect of stocks, other investors love the tax savings and flexibility of real estate. Regardless of your preferred asset, it’s better to stick your hard-earned money in something that makes money for you, instead of spending it or letting it sit. Our guest today, Madison, is having trouble deciding which asset class she and her husband are best suited for. They have high-income jobs, a great net worth for their age, and just moved from the expensive San Francisco Bay Area to far more reasonable Texas. They’ll have a lot more money to stash away without the high rent, gas prices, or child care they had in California. But neither Madison nor her husband have plans to retire early, so should they even plan for early retirement? Scott and Mindy walk Madison through her multiple different investing options, along with giving her the structure to formulate a three, five, and ten-year plan for wealth building and financial freedom. We may hear back from Madison very soon on the progress she’s made! In This Episode We Cover Why relocating to another state can be a massive savings lever  Understanding when you want to retire and how your assets play a part in retirement  Putting in your “500 hours” to any asset you truly have an interest in  Turning your primary residence into a rental property after you upgrade  Stock investing vs. real estate and the pros and cons of both Reducing your spending so you can save (and invest) much more And So Much More! Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey there, as the Bigger Pockets podcast network grows, we're always on the lookout for talented people who think they have what it takes to co-host a show. Is that you? Do you want to be just like me? Well, you can make a submission to our system at biggerpockets.com slash talent so we can get to know you. That's biggerpockets.com slash talent. You'll see a few questions and a place to submit a video reel. Again, that's biggerpockets.com slash talent if you'd like to lend your voice to the great Growing Bigger Pockets Podcast Network. Welcome to the Bigger Pockets Money Podcasts show number 260, Finance Friday edition, where Scott and I talk to Madison about too many great options.

So it's kind of like what kind of ROI are we going to get on which we're out, and I think that we have so many opportunities and possibilities. But for me, it's which direction we want to go and studying it and understanding those directions. is where I'm kind of at my crossroads right now. Hello, hello, hello. My name is Mindy Jensen. And with me, as always, is my Most Charming Smile Award-winning co-host, Scott Trench.

That's right. Co-host of the Bigger Pockets Money podcast and five-times winner of the Most Charming Smile Award. And I don't like to talk about that. Scott and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story because we truly believe financial freedom is attainable

for everyone, no matter when or where you're starting. 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 choose from all of the above as options. We'll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. Scott, I love today's show. Madison and her husband earn a super awesome income and they want to start investing for their future. They want to have a very high net worth. And they've got a great net worth right now at age 30, but they want to grow it. So they are trying to decide between 412 amazing options.

Yeah. I mean, I think what came out of, we actually ended up having a great discussion today. I think a really fun episode with all this kind of stuff. And then ended up saying, you know what? I don't think that Madison and her husband are clear yet on what they want out of their lives over the next couple of years. and that dictates what you do with your money and what financial approach you want to take with this kind of stuff. And so I think as the discussion evolved, we could talk about ways of like, hey, if you want to work for 10, 20, 30 years, you do it this way and that's fine.

If you want to retire in three to five years, you've got to do it this other way. And there's tradeoffs and consequences of that. If you want something in the middle, there's other approaches there. But it's what do you want and how do you develop a financial plan in a financial, a financial approach that gets you towards what you want. And determining what you want, I think is maybe the hardest part. So I think there's a really valuable episode. End of the day, Madison, we're going to invite her and her husband to come back on the show

sometime in early 2022 after they've done a little bit more vision work and kind of have a little bit more clarity in their long-term goals. Before we bring in Madison, now we have to hear a note from my attorney who says The contents of this podcast are informational in nature and are not legal or tax advice, and neither Scott nor I nor Bigger Pockets is engaged in the provision of legal, tax, or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal, tax, and financial implications of any financial decision you contemplate. 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 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. 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, profit,

benefits, taxes, invoices even. So reclaim your time and your sanity. Open a found account for free at found.com. That's fowundd.com. Found is a financial technology company, not a bank. 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 audio book completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leen or 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 is 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. Madison had been living in a super high cost of living area, the San Francisco Bay Area, but she and her husband just got new jobs and moved to Texas. They're looking for advice for maximizing investment returns and focusing on long-term goals rather than short-term whims. They'd also like to be financially independent tomorrow, but wouldn't we all? Madison, welcome to the Bigger Pockets Money podcast.

I'm so excited to talk to you today. Me too. Thank you for having me. So you have a bit of a big change coming up because the San Francisco Bay Area is a little bit different than Texas. Yes. Yes, we decided to move out of state, out of California and take an adventure to Texas. Well, Texas will be. And what prompted that move?

Cost of living mostly. We get paid a good salary here, but the cost, we have one, two-year-old, and we have a baby on the way. So the cost of living, plus with children, it was adding up. And so we were, yeah, eager for a new adventure and thought that we would have, I don't know, more financial freedom elsewhere right now for us. Yes, you will. San Francisco is very, very expensive. And congratulations on the baby on the way. Yay, babies. We love babies. Okay. So moving to Texas, you're going to take a bit of a pay cut? We are not going to be taking a pay cut. We were planning on potentially taking a pay cut. We were trying to keep it no less than 10% of a cut. But we were fortunate enough to find opportunities that we will be getting paid the same. Okay, so you're making San Francisco money and living in Texas. I see a bright financial future. Wait, let me look into my crystal ball. I see a bright financial future for you. Okay. Well, let's jump into those numbers. What is your monthly salary? Yeah, our monthly salary, so this is joint take home for both my husband and I is around $12,000 a month. Okay. And what does take home mean? Is that after just taxes or is that after taxes and health insurance and 401K contributions and that sort of thing? Correct. All of the above. So after 401K, after our FSA, our medical and then taxes. Wow. Okay. That's great. So we're looking at somewhere north of like 200, 250 in combined total salaries, right? Correct. Before all that. Awesome.

So anything else on the income front? No, that is our income. No other side hustles or anything. Okay, great. And any like annual bonuses, stock options, things like that? Yes. Sorry about that. We do have annual bonuses and take home annual bonuses are around 12,000 annual.

Okay, great. And what do you guys do? Yeah. So both my husband and I work at the same company. company. We actually work at a general contractor here in the Bay Area. Okay, great. And then where is that money going? And maybe it'd be good to get a quick kind of idea about where it's going today and where it will be going post-move or what you kind of anticipate post-mov. Yeah. So we do, we max out our 401K and then obviously that

that was included in what I shared with our income. And then the first thing we do is we pay ourselves. So we max out our IRAs. We have a brokerage account that we put some money in each month. And then we have a 529. We do some in crypto. And then we also save about, let's see, what is it, $900 a month in our just personal savings.

And then after that, it's our, you know, expenses. So rent, child care, insurances, and then our variable costs. We call them essential variable costs and then our non-essential variable costs. So the rest kind of goes there. And then anything remaining will just put back into our savings. I love the pay yourself first concept. How much do you do you, would you say that you put in? to pay it yourself first. Yeah, annually. So what we've been doing, what we're tracking for

2021 is about 30, let's see, 35,000. Awesome. And then what do you expect that to change to with the move? Oh, that's a good question. So we're still, since the move is so fresh right now, we're still kind of breaking down our budget and our spreadsheets of what that new cost of living is going to be like in Texas. We haven't really gotten all the numbers detailed yet. out yet, but we'll probably be figuring that out. I'm hoping it goes up quite a bit, at least 10 granders or more per year, but something I still need to kind of jump through. Well, let's dive into a couple of the big ones. What was you, what were you paying for housing previously and what we'd be paying post- Okay. So for rent right now, we pay $2,900 a month. And our estimated mortgage post-move will be

$2,600 a month. Okay, so that'll be cheaper from a cash outlay basis. You'll have some maintenance. You'll have to assume on top of that, you'll begin building equity and all that kind of good stuff. Is it more square footage? It is. It's double square footage. Yeah, that's always nice.

The two bathrooms was huge when we moved out of the house hack a few years ago. Actually, we have two and a half now. Very luxurious. What are some other ones? Like you mentioned child care. Do you expect that to change? Yeah, that should be more than half of a decrease. So right now we pay with our FSA, we pay about $1,800 a month.

And we're looking to pay about $1,000 a month or less per child there. Okay, awesome. So it'll actually be, you actually pay more in child care shortly because you have another one on the way. But in the short run, it'll be cheaper by about 800 bucks. Yeah, but that, that was about per child here. So, 1800 a month per child here versus 1,000 there. Yep. That makes sense. What about any other items that you expect to change meaningfully with the move? So I know like groceries goes down. We're actually going to be getting one car with our new company, so we won't have any of the maintenance or car payments for that. And then gas,

we get gas cards with both of our new jobs in Dallas, which we don't have currently here. So we won't have any gas expenses, which is very high in California right now and increasing. So that will be helpful. Other than that, I think, you know, we probably could cut out some fat elsewhere, but I think the other buckets of money, what we have, it will probably decrease by, you know, tens of dollars just living in Texas, just being cheaper. But I don't know, you know, how much that will decrease by. Okay. So, well, I think this is interesting, right? You think, oh, I'm moving from San Francisco to Texas, there's going to be a huge decrease in savings. What we're finding is, one, well, the biggest thing

is there's a big, what I would imagine is going to be a quality of life improvement. you'll probably get you probably get a really nice neighborhood and a really huge house for less than what you're paying previously and as an owner with that. So that's a pretty big improvement. On the child care front, we would have saved $800 a month, give or take, but because there's a second child on the way, that's going to actually go up or stay about the same with that. The income stayed flat with the move on that front. And it's pretty interesting to think, oh, you actually have to get a car now because most cities that are not probably New York or San Francisco, it's probably a good thing to have at least one car for a family with this kind of stuff. That's not something I usually consider when talking to folks, but I'm always reminded of when I hear about folks who live in places like New York or San Francisco. So really interesting to hear those kinds of puts and takes.

And all told, you think you're going to save about $35,000 to $45,000 per year through these pay-it-yourself-first mechanisms that we just articulated. Yeah, that sounds about right. Okay, awesome. And then where are your assets and liabilities today? Yeah. So we have, let's see. So we've been saving for our down payment for quite a while. And so currently that's about 16%, but with closing on the house, that's going to all go to that down payment.

We have about 65% of our net worth in our 401K. And then, let's see, we have a little bit in crypto. And then our IRAs and brokerage accounts in 529, we have about, let's see, I think that's about 15. percent of our, um, of our assets there. Also, and, and where would you peg that net worth at? Yeah. We're looking at like six hundred and forty thousand right now. Okay. So six hundred 40,000, the lion share is going to be in the home equity down payment and, um, uh, various retirement accounts. Correct. Yeah. Our 401k is, um, a good majority of that. Okay, great. Um, what is the best way we can help you from this?

position. Yeah, I think our expenses seems very high currently. We pay right now our expenses, our fixed plus our variable expenses are about 9,500 a month. You live in San Francisco. That is true. But I do like to shop. Well, stop. Yeah. I know. I need to stop. So I think, like, you know, cutting out the fat a little bit and having clear, we're really good at having short-term goals of like, you know, we want to have X amount for a down payment, or we want to have X amount in our 529 or, you know, setting aside paying ourselves first

each week or each month. But our longer-term goals, I feel like need. maybe me personally, I struggle with conceptualizing that. I'm a very competitive person. I want things done now. And when, you know, the financial game, I feel like, is very much of a long-term kind of game. And so sometimes I struggle with that. So I guess one of my questions would be, like, if you were in our shoe,

in my, me and my husband's shoes, how would you go about, creating a longer-term goal for that financial freedom down the road, like, retirement. Okay, Scott, I'm going to jump in here. I have a couple of things to say. So what does long-term mean to you? Is that 10 years? Is that – because you're 30, 31, 31? And 31.

Okay. So 31, are you talking about at age 40, age 50, traditional retirement age of 65? Yeah, I think – that's a good question. I mean, longer term, 65 for sure. But even, I would say, like, 20 years from now. Okay. So at age 50, you want to be retired. At age 31 in one day, you want to be retired.

But that's probably not going to happen. But we're working on it. So in 20 years, you want to be retired. Do you want to be retired in 10 years? That's the thing. I don't know. I enjoy working. I enjoy what I do.

I know my husband does not want to retire early. Like, he really enjoys working and he, that's who he is. He's all about work. And I love that about him. For me, on the other hand, you know, I don't know. I would be open to not retiring early if the financial gains at the end and I could leave, like, my kids more money than I would not. But I also, you know, want to enjoy that time and maybe retire early. So that's, I struggle with that.

I honestly, I struggle with, you know, I'm not sure what I'll be like at that time. I want all the money now. And then I can make my decision. Okay, super easy. I am hearing that you and your husband have slightly different outlooks on your working life. And that doesn't mean that you can't retire early. My husband doesn't have a job.

He's retired and I still have a job. And that's okay. but we've talked about it. He worked for a long time while I sit home with the kids. And now I want to work. I've got this amazing job. And I get to work. I get to do this thing.

And it is, you know, there's nothing wrong with enjoying your job. I think that you and your husband need to sit down and listen to episode 157 where Scott and I talk about having a money date. And it's a no. confrontation money date. It's just, hey, what do you want to do in five years? Or if we had $12 million, we won $12 million, how would you spend the next month? Oh, I'd like to go on vacation. Great. Let's plan a vacation for next year. What would your vacation look like? Oh, well, you know, if money was no object, I'd love to sit on the beach. I'd love to travel around the world. I'd love to,

you know, whatever it is that you guys want to do, start looking at things like that. And then while you're on that vacation, talk about, you know, if we were both retired, this is something we could do all the time. Or this is something we could do more frequently. Or, hey, this is nice every once in a while, but I don't want to be on the beach all day long. I want to go back to work. I enjoy creating and, you know, furthering my career and, you know, building things and whatever. But having the conversation is really, really helpful to seeing what you want.

In 10 years, if you don't want to have a job, then work towards not having a job. And what does that look like? You're financially independent. What does that look like? Are you, you know, do you have a financial independence number? Have you sat down and said, we spend $9,500 a month? So that means, Scott, do the math quickly. We need $120,000 a year.

I did that myself. Yep. $119,000 a year. That means, oh, now you do the math. Times 25. Scott, what is that? Quick, quick, quick. 120 times 25?

That's $3 million. So now you have $640,000. You have a goal now of $3 million. But if you start living in Texas and you realize that you're only spending $6,500 a month without giving anything up, you don't have to give us. give up anything. You're 31 years old.

$3 million is pretty realistic in your lifetime. $3 million by age 40 is going to take a little bit more work. Scott do the doubling for me. At $6.40 in 8 years, that'll be $1.28 million. And in, what was that, eight? So in 16 years, that'll be... A little over 2.5. So 2.5 million in 16 years.

if you don't contribute anything else to your 401k, assuming a 10% return, past performance is not indicative of future gains, all those disclaimers. But you have a very real chance of getting to $3 million within 20 years. So at age 50, you'll have the money to retire. Yeah. Let's bump that up a little bit by putting more money in or investing in cash flowing assets or creating passive income or, you know, other things that we can do to, you said you worked at a general contractor, like a building general contractor? Yeah, commercial building. Okay. So there's opportunities for real estate investment. I don't know if you know that, but yes, that was another question. Yeah, yeah, absolutely. Look, I'm just hearing you say with all this

that you don't really know what you want. You don't only have like a plan or like a, a thought process for three to five years out right now. You kind of have some ideas for 10 to 20 years out. And like Mindy's just said, that's okay. You guys are doing great. You're an incredible income. You pay yourself first. You have a number of investments. You just made a move to what sounds like dramatically improve your lifestyle with all this kind of stuff. You got another family member on the way like you're winning. Life has got to be pretty good. I would imagine a lot of things going right to a general sense. Is that how you're feeling? Yeah, absolutely. I think my husband and I, when we met, we started our money journey or

financial journey together. So we have a lot of learning to do. And I feel like right now we have kind of the world at our fingertips and we have so many possibilities and opportunities ahead of us. And it's just now diving into that, you know, which direction do we want to go and what's going to be best for our family. So yeah, is it like buying? rental properties next. That's really big. My brother is into rental properties. He has a brother that has six rental properties and he's 27 years old. So is that something that we want to dive into? Or is it something, you know, my husband has been studying the stock market a lot. Do we want to jump into more of the stock market? So it's kind of like what kind of ROI are we going to get on which

route and I think that we have so many opportunities and possibilities. But for me, it's which direction we want to go and studying it and understanding those directions is where I'm kind of at my crossroads right now. Yeah, I think that's what it comes down to. It's what, what do you want? And you got to start with life and then map the finances to that, right? like because otherwise you're going to get what I want instead of what you want or whatever with that right so that that's what we have to start with and that money date on on episode 157 that Mindy referred to that's a good place to start and this is this kind of like kind of cheesy vision stuff that I think can be really hopeful with that like what do I

want like what's a perfect day for me in three to five years right my kids will be this old what do I want to do I want to wake up and do this. I want to do I want to go I want to go to work. I want to do this. I want my kids to be like behaving or achieving or having fun like this or whatever it is that I'm looking for. Like this is how I want to do vacations. This is how I want to do Christmas. This is how I want to do my career. This is the impact that I want to have. These are the things that I want to be doing on a regular basis with that. And from there, you can map into that, right? If you're saying, because if I'm, and it depends. There's no right answer to that.

But if you're saying, no, I want to continue advancing, me and my husband both want to continue advancing our careers for the next 10 to 15 years and kind of push that as far as we can go with that while having, you know, some sort of the balance that we like with our family, then I wouldn't change essentially anything that you're doing right now, you know, not in a big way with that. We can always argue the Roth versus the 401k, which is always fun. But I think I think you're doing it right, right? you're piling up a bunch of money, you pay yourself first, you're saving well over 10% of your income, you're going to be rich. And you're going to have a plentiful retirement, most likely, when it's all said and done because you have two strong income earners that, that are working full-time and bringing in a great income with that. That leads to a more passive potential investment approach. And like many sense, even without further contributions,

you've got a good chance at being worth $2.3.3 million inside of 20 years, probably much more if you as because you you'll continue to contribute of course there and like you can still go shopping and do all this kind of stuff you don't need to control those expenses but if you're like no i want to i want to stop working for a period of years in this and and and and go that way okay now you've got to shift those assets away from what is right now disproportionately um a position that's that's got a huge you're disproportionately skewed towards retirement accounts and home equity or you will be with this approach over the next five to 10 years. And you will have very little in the way of funds that you can actually spend or use to start businesses or buy real estate and that kind of

stuff with your current savings approach. So it just depends on what you want and how you want to go about that. Do you have an inkling with that or do you have a direction you could kind of Yeah. After you mentioning that, I definitely see myself working and advancing my career for the next 15 years at least, 15, 20 years. I'm in a very good spot. You know, my husband and I are both project managers. And so we love what we do. And so I don't foresee myself taking any time off as of right now. You know, we definitely want to, I want to advance my career as much as he does as well.

So with that said, I think, you know, like you said, we're going to continue to invest in ourselves, invest, you know, putting, maxing out our 401Ks. and in living a lifestyle that is good and what we like. But it's where are we going to start since we've been saving up for the down payment and buying our first home. Now what can we be saving up for? Is it a rental property? Is it, you know, do you suggest paying down a majority of our primary residents?

it's kind of like our next step is kind of unclear right now because we just accomplished our first goal of buying that first home. So now it's like, okay, we're going to be making this money. We're going to be in a lower cost of living. What's our next step going to be? Yeah. So here's why I don't like rental property investing. Not as I say you can't, but here's why I would steer you away from rental property investing in your situation with this. With rental property investing to get started in it, I think you need to invest 500 hours. at least in learning about this kind of stuff, books, podcast, networking, YouTube, blogs, whatever it is to feel comfortable with it.

There's so many mental models about how to screen a tenant, how to pick the property in the right area, how to think about cash flow versus appreciation in those tradeoffs, how to estimate all the expenses in those different types of things, how to get comfortable hiring contractors or property managers with that kind of stuff. You guys are working professionals, and your goal is to crush it in that career for the next 10 to 15 years, right? That is, that means that the opportunity cost, let's say that you guys each earn $150,000 annualized with that. That means your time is worth $75 bucks an hour, each with that. So to get that $500 investment, that's a pretty significant investment. It's like $35,000,

something like that, $35,000 in opportunity cost that you could be plowing back into your career or some of these other things that you're more excited about. And then if you're, a rental property, let's say you buy a $250,000 property that rents for $1,900 and with a mortgage of $1,300. I'm making these numbers up. I don't know how Texas would work on that. Maybe you're getting a $300 per month cash flow, right? Well, you guys bring in $30,000 a month or $25,000 a month.

So you would need to stack up 100 of those before you're bringing in equivalent income to your salaries with that. And so the only way to make a investment that's meaningful enough relative to your income, I think, is you're going to have to take on a tremendous amount of leverage or really go all in on real estate one after the other over a prolonged period of time. And so not to say you can't do it, I just think in your situation, that's a big opportunity cost considering that you're most likely going to get rich going the more passive route here. And not to say real estate's out, but I think that, um, passive real estate or as a combination with stocks or something like that might be an alternative

if you still like the asset class of real estate and like learning about and thinking about investing with that. But I'll let you react to that. Yeah, I guess I'm a little shocked. It's something that we're definitely interested in. We're even thinking our first home could be turned around in about two or three years and we use this as a rental property down the road and then we go to our next home. Yeah, as an option. We are also looking into duplexes, but there wasn't anything that we found.

That was a good fit for us in the Dallas area. Yeah, so I guess it is something that we're interested in. So I get what you're saying, as long as it's kind of our passive, like our kind of a side thing is what you're saying, correct? It will not, I think you will take on a lot more risk or you will sacrifice a lot of return if it is actually passive in the first couple of years of getting started. Right.

Like it can get passive and it should at some point with that. It's always a, it's a sliding scale. It's a semi-passive business. But it is an active pursuit, I think, to learn what you need to learn to get started and make a quality decision on this kind of stuff to get. to get in in general, to give yourself the best odds of success with it. And I'm just challenging whether you guys, given your profile, may want to make that investment. It may not be worthwhile because you have to invest so much for it to be meaningful

compared to the hundreds of thousands of dollars that you're able to just sock away in these 401Ks with that. I mean, it sounds like you have $300 to $350,000 in these 401Ks and other investments. Yeah. Our joint 401K, we have about 420,000 currently. And then our IRAs, we have, we have about 85, 86,000. So we have a good pile up, but they, you know, they max out. So that extra cash that we're saving, you know, we're putting a lot of it down for a down payment.

But now it's like we have that house now. So now we're going to invest. and try to get more return on that investment. 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 Pock.

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 in Edle. 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 Northwestregisteredagent.com slash money-free. It's never too early to plan your summer story in Europe with WestJet, from rolling countryside to cobblestone streets. Begin your next chapter. Book your seat at westjet.com or call your travel agent. WestJet, where your story takes off.

Did you buy your current house with the intention of converting it into rental in the future? Was that a forefront of the decision making process? Yes. So we looked at multiple homes that, you know, a forever home. And then we also looked at like a starter. Let's live in it in a few years and then rent it out after a few years. So that was our intention with this home. And we actually got kind of our investment home style first right off.

Great. I think that's a really smart way to go about it. That's a good exit option that you've given yourself. You can probably live there for a while and enjoy the double square footage from your old place. And hopefully one day sell it if prices go up and then also keep it as a rental. But that's a three, those are three good exit options, I think, for that. So I can't argue with that approach with it. And the fact that you know the place and have lived there and probably have a few years to go and find a property manager. That makes a lot of sense to me with that. And by the way, I don't want to say you can't invest in real estate. If you decide, hey, I want to go in real estate, we'll help you with that. I just wanted to kind of say for your kind of profile is kind of the classic one that I'm like, I don't know if real estate is exactly the right choice for a couple earning $300,000 a year, working full time with two small kids to get started in. Because, you know, and your goal is financial freedom in 15, 20 years.

You know, real estate, the real estate's a really good option for somebody who's trying to get the financial freedom in seven to 10 years with that, willing to use a leverage, work, fix up a couple of things themselves as the first couple of times, make it passive over time, invest those couple hundred hours, that you can still do it with that. But I would think you just want to be shooting for a bigger portfolio, you know, if you're saying, I want to get the $7 to $10 million in net worth in the next 10 years, then working this job and going into real estate makes a lot of sense to me. you could certainly have a chance at doing something like that. Got it. So I get, I mean, you're too rich to invest in real estate. I don't think that at all. It's funny to hear you say that, and I appreciate that. I mean, we've worked really hard,

and I'm proud of where we've come from and where we are currently. But my mind goes, I feel like I'm challenging a little bit. you a little bit because I would like to get your advice on, you know, yeah, seven to ten years, having seven to ten million dollars sounds fantastic. And that's what I want, you know. I want to. Great. So those are the things I want to learn about. I want to do. And so does my husband. And that's, you know, we don't know what we don't know, right? So having these conversations is super beneficial in why I'm here. So if you, I guess if you two were in our shoes with the income that we're making, with the decisions that we've made of leaving California and

moving to Texas, what would be your next steps? Well, first with the goal of getting to $7 to $10 in the next five to seven to 10 years. Yeah, 10 years. Let's call it 10 years. Okay. That was that was fun. We can work with that one. Yeah. Well, you've already. saved yourself a ton of money. We didn't even mention this, but Texas has no state income tax, whereas California does. And so you just gave yourself a whopping race. I would take all of that money and put it into the stock market. Personally, this is what I would do. You said that you have an after-tax brokerage account. Where are you putting that money? Are you individually stock picking, or are you putting it into index funds? Index funds right now. My husband and I have been

studying a little bit more about picking stock options. But we're planning to roll that out. We were going to do it December, but we pushed it out to March. I would say, read the book, The Simple Path to Wealth. Is it the simple or a simple? Either way, it's by J.L. Collins. Simple Path to Wealth. It is fantastic. And basically, it is boiled down to invest in index funds and don't pick stocks. But he fleshes it out into a book about this thick, which can be boiled down into invest in index funds and not individual stocks. Because the individual stocks can rise and fall, but as the index goes up, all the stocks, like he says it better than I do.

But it's hard to pick a good stock. You can get lucky by doing a ton of investing. I'm sorry, a ton of research. And, you know, really knowing whatever genre you are technology. what is it, sector, not genre, sector. Really knowing the sector that you're investing in, really knowing this specific company that you're investing in. That's a lot of the, Scott mentioned 500 hours for real estate investing.

This is more. Or you can buy every single company in the whole index and be better. Yeah. Make a better return. There are very few people who are making better returns than the stock market. That's what I would do. I would put it into like all of the, my income tax money is now going into the stock market. I would check my spending. And I'm only

saying this because I recently have noticed that my spending is going insane. And also you mentioned that you like to spend money. So check, like, what are you really spending money on? I find that it's very interesting to be like, oh, healthcare was this much and childcare was this much. And groceries, yeah, yeah, that's probably right. But when you track every single penny, you find that, oh, groceries is way more than I thought it was and gas is way more than I thought it was. And I'm, you know, I forgot about these things that I was not categorizing as groceries because I didn't buy them at the grocery store.

But like Costco is groceries, but it's also oil changes and tires and like random weird stuff. So some of it gets categorized as groceries and some of it gets categorized as other things. I might just categorize it all as other things. And I'm not really honest with, with my actual spending. This is, I'm a nerd. I love, like, winning. I really love winning. And this is another thing that you said you want to win.

Get yourself as spending tracker on your phone and track every penny for several months. And be like, after you start tracking, you're like, oh, I have to put this in the spending tracker. I'm not going to buy this today. I wonder how low I can spend on gas this month. So I'm not going to fill my gas. gas tank because it's the 30th. And I'm just going to plan all of my errands for next month. And you really start thinking about your money when you're trying to win.

And the game is, how little can I spend? And it's, like I said, I'm a huge nerd. Scott, you're going to argue with me and that's fine too. I'll give you a moment to argue with me. But, you know, that could be, I mean, you could very easily from your $9,500 in expenses, I think living in Texas, you could very easily cut $3,000 out of. of that without feeling a pinch. And I think you could cut 4,000 out of it if you wanted to tighten your belt just a pinch. But if you really wanted to go whole hog, you could cut a lot

out. And that's not saying that you have to all the time, but that could juice your after-tax investments. And then all of a sudden next year, you have $7 million. Yeah. Look, let's reframe the goal as I want an all-out approach, given my context, to getting to north of $5 million in the next Five to seven years. I'm going to call it that. That's how I'm framing this. There's four ways to do it. You can spend less, earn more, invest, or create. Those are the four options that you've got with that. Your expenses, I think, are a good place to look because you're not generating enough after-tax cash flow to make large investments at the pace that is rapid enough to get to that $5 million mark inside of five to seven years. Like I said, you're going to get rich over a 10 to 20, 20-year period, no problem with what you just stated there if you keep on that career. But if we're reframing with the new aggressive goal, we need to do that. I think Mindy's right. You probably have like $2,000 to $3,000 per month in incremental savings that you can squeeze out

by just getting some controls in place and a budget review, basic budgeting processes and controls over those expenses, and working on a couple of those fixed expenses. And especially with that the next move you make. make in your housing with that and seeing if you can do some things there. So there's probably two to three thousand dollars in the next couple of months. There's probably maybe another 500 to a thousand over the next year or two with that. But then you're going to be starting hitting a floor where it's going to impact your life would be my guess in terms of on the expense side. Okay. But that frees up. We've now got $30,000 to $45,000 a year before those changes.

And that might add in another $35,000 years. You have $70,000 to play with. per year after you're maxing out your 401ks, your HSAs, your HSAs, and the other things you're doing with that. You guys are probably, if you're both working full-time and given the income profile you just described, are going to continue to get raises over the next couple of years with this. So you're probably going to see that number creep from 70 to 85,000 a year to 100,000 to $115,000 per year over the next five years kind of deal. So, okay, what do we, what do we do?

with that, that's a reasonable amount of free cash flow. And I'm probably even understating it a little bit based on what you were, based on what you were kind of describing about where your money goes there with that. You probably have somewhere in the ballpark of $70,000 to $100,000 year. That's enough to make a meaningful real estate investment or two every year. And now you can begin building a portfolio. But again, because you guys each probably earn $150,000, this portfolio, to be meaningful needs to generate like, you need to buy a lot of real estate. It can be a few large properties or it can be a lot of small properties, but you need to be thinking a pretty big portfolio for it to be relevant to your current income with this. So Texas is probably a fine place to go, but if you're looking at $200,000 properties or $250,000 properties, you're probably going to need to buy two or three a year in the first couple of years and snowball that to five or six a year in the out years with that.

And that's going to be, what do we just say? We have $500,000 in savings over the next five years. That could purchase about $2 million in residential real estate in the Fort Worth. You're in Fort Worth, right? It will be Dallas. Dallas, okay, in the Dallas area. That seems like a pretty reasonable market, as far as I can tell, as an outside observer, looking in. Texas has got a lot going for it right now.

You've got high property taxes and a couple other things. like people are moving to Texas because they want to move to Texas and they don't want to be in the areas that they're coming from. You're a perfect example of that. So that's at least a pretty good fundamental starting point to think there's something here for that. Of course, I'm a big Eagles fan. I can never, I can never be down that. Okay, but that would get you, that would get you, you know, probably about, I don't know if I can get you to five to seven million on the, on this front. So that that would be. an approach to doing this. Why would you do that versus investing in the stock market? It's because

you think you're going to get some sort of ROI that's in excess of what you could do passively. If you invest passively in the stock market, I like to assume a 10% rate of return. Now, some people will say that that is way too aggressive. Some people will say it's way too conservative. But I think when comparing stocks as an opportunity cost investment to real estate, it's a pretty reasonable one. So here's a framework about why, how real estate could be better. If I buy a property for $300,000 and in an average year, this is not an average year, I don't know what it will be like in the next couple of years, but in an average year, we see about 3% annual appreciation on that property. So we'll go from $300,000 to $309,000 at 3% appreciation, usually about

three and a half. So it's called $310,000. And I'll get cash flow on top of that investment. So on a $300,000 property, maybe you're getting $2,000 a month in rents and you have $700 a month in expenses, cash free, debt free without the mortgage. And that brings you to $1,300 a month in cash flow. That could get you another maybe, I don't know, six, five to six percent in cash flow with that. So 3 plus 5, 3% on appreciation and 5% from cash flow, is only 8% return on your investment. That's worse than the stock market. And what you'll find, I think, is over long periods of time, unlevered real estate does worse than stocks. But leveraged real estate is what helps you get that extra return.

Because if I put down 20% or 60 grand, then that $10,000 or $9,000 return, that 3% appreciation on a $300,000 price point boosts my return. It's a 15% return when I've put 20% down on a rental property plus then the cash flow, right? The cash flow is partially offset by the mortgage payment, but I might get a 15% ROI on the appreciation front, and I might get 6 or 7% on the cash flow front. That's a 22% return. And then I'm also amortizing the loan, which adds in another couple of points, right? And that is why real estate is more powerful than stock investing on this front with it. You get less cash flow at first, but over time, your rents increase, your mortgage payment

stays flat, the property price increases, and that's how you're able to compound these returns with that. If you're willing to balance that return and say, hey, great, I'm going to use leverage, but because I'm using leverage, I have to now operate the property very efficiently. I've got to spend that 500 hours learning how to screen tenants. I've got to learn which area of the market, why that part of the neighborhood is really good for investing and why that part is not. not whether short-term rentals are a good idea in this area versus that area to change that cash flow,

whether I want to do rent by the room or another creative strategy in this part of town, how to hire a property manager, if I don't want to manage it myself, which I don't think you guys will because you need to buy a lot of real estate to supplement your, to defer to be relevant relative to your income position. All of those things can help you sustain that spread, maybe a 15 to 17% return on your investments versus the 10% average you might get in the stock market over a long period of time. But you first have to believe that you can get that. And then second, be willing to put in that effort.

And where I was kind of coming from is, and this is going back to calculus, and I'm probably going way over a lot of people who are listening to Head Zero. So I'm sorry because I'm going to go in here with this. But, you know, if I were to take that 10 years and say there's a spread between that, you know, that 17% return and the 10% you can, could get in the stock market with that. And are you willing to put in the work by making real estate your hobby in a very big way over the next couple of years in order to get that return? Well, that pile's got to be pretty big. And so that's the point I'm trying to make with the real estate investing piece on this is, yeah, it's a hundred, it was a hundred percent worth it for me

to do real estate when I was making $50,000 a year and just getting started. It may not be worth it for you at $300,000 a year unless you badly want that $5 to $7 million position. And that brings me all the way back to what do you want? If that $5 to $7 million, if you think you can make that $5 to $7 million over $5,000, $10, $12 years and that's a big enough spread, that's an extra couple million, what are you going to do with it that's going to improve your life? Okay, that was long run. That was very helpful.

Thank you. a lot of things to think about and to ask, you know, ourselves. Mindy, it looks like you have something that you wanted to say. I was just going to say, yeah, I think the two of you should sit down and listen to this episode, listen to episode 157 where we talk about the money date and just you don't have to decide today. You don't have to decide by the end of next year. Just talking about it with your spouse, looking at the different options.

if Scott can scare you away from real estate so easily, then it's not for you. If all that he says doesn't convince you that real estate isn't where you should be, maybe you should look into real estate. We've got this little website called BiggerPockets.com. And if you need to know anything about investing in real estate, I bet you can find it on our site. And reach out to me if you're looking for a specific thing because it can be a little bit difficult to find we've been around for 17 years and we have so much information. But I can give you links to great articles about like how to buy a rental property, how to

screen a tenant. It isn't just, oh, you want to rent my property? Great, let's go. There's a lot more involved in it, but it's not this like super daunting task. But, you know, if Scott can can talk you out of it really easily, if Scott can talk your husband out of it really easily, then start looking at the stock market. Look at, you know, different ways to it. There's so many ways to make money.

There's so many ways to make money. I, again, really think that peaking at your finances with a, you know, not peeking at it, really staring at your finances with a microscope will show you a lot of little holes. And I mean, you're still doing really great. You have a net worth of $640,000 at age 31. You're going to be just fun. But if you want to grow it, if you want to, you know, really have all the options, be financially independent tomorrow, paying it. attention to where your money is going. And, you know, was it episode 11 with Frugalwoods?

She said when we first discovered financial independence, we sat down and we cut out everything. And then the next month we're like, well, that was awful. We want to add some things back. But they added some things back. They didn't add everything back. They looked, she, I mean, her name's Frugalwood. She looked for ways to do it cheaper. She discovered that she really likes yoga class that she had cut out.

And if she could go in early and sign people in, she got a free $20 yoga class. She's like, I'll do that instead. So she got yoga every week for free. And there's lots of ways to cut your expenses or, you know, and like Scott said too, you're making, what are we calling it, $75 an hour for the purposes of this conversation, is a $20 yoga class and an hour of your time worth it? Probably not. But maybe there's something that you're doing that's $150.

there's an hour that you could cut out by spending a little bit of your time. You're in this really weird space where you have probably more money than time. And with another baby on the way, let me tell you for sure you have more money than time. But, you know, everything is a give and take. And maybe you really enjoy checking people in for yoga so you don't care that you're not making money on it. You know, it's, it's a game. It really is. You said, both you and your husband,

We're athletes. This is a game. And you guys are going to win together because it's you two against the world. It isn't you against him. It's the two of you against everything else. But yeah, you've got a lot of options. So sitting down and listening to this episode, sitting down and listening to the other episode and just starting to have a conversation, you know, you talk about it at dinner.

The baby's not listening to you. The baby's just going to babble and, you know, keep stuff in her face and she'll be fine. And you guys can have the conversation. and hey, I was thinking about this. I was going to make a purchase. You know, just being open and honest with the money. And if you're spending too much money on Amazon, get rid of Amazon Prime because I don't know what that is about that. You know, oh, it's free shipping.

I'll buy it instantly. Oh, $5 shipping. I don't know. I'm going to have to think about it. I mean, what's $5? Really? If you can afford the thing, you can afford the $5 in shipping. But that was one way that I got rid of spending so much as thinking about the shipping costs,

which is dumb, but it's all a game. Again, I just kind of come all the way back to what do you want, right? And, and. Well, that's where I was too. You know, I think, yeah, no, I, I agree. But I just don't think you're clear on that. And if you can say, like, no, I want to be fully retired traveling the world on a boat in three to five years.

Okay, we have a completely different game plan that's needed to do that than to be sitting really nice in about 15. 20 years after working full-time careers with all that kind of stuff. And one's going to get you richer than the other with that. One's going to get you a different lifestyle with that. You can have to move the money differently with that. I just think that you're in, if you like what you're doing, you're doing all the right things.

And I don't have too much in the way that I change other than like we mentioned, getting control of expenses and putting in place the blocking and tackling. with that. That said, if you like real estate, it definitely can be a great way to add a lot of net worth and cash flow to your position outside of those retirement accounts that can give you freedom. You're just going to have to either rethink your really how you're fundamentally setting up your expense profile because you need a lot of money to sustain this lifestyle with that that you're going to get from the stock investing with this. You need a lot of real estate in order to make that work. So just be prepared to go in and put a lot of chips in with that

and spend a lot of time self-educating about that. We certainly have a place for you to do that if that's what you're interested in doing. So I won't discourage you from going down that path if that's what you'd like. Yeah, absolutely. Absolutely. No, I think you guys nailed it as far as having more conversations about kind of our individual goals and then, you know, discussing how we can accomplish those individual goals together if they are different. And then from there, determining our short-term goals to get to that longer-term goal. And like you've said and mentioned, is it could be, it's going to be different if it's a three to five-year goal or if it's a 10 to 15 to 20-year goal of what we want. So yeah, we have a lot of conversations and work to be doing.

Can we do this podcast again? I think we have a lot to talk about here. And, and, you know, again, as we've discussed, I think now a couple of times, the root issue, I think that's delaying strategy or delaying certainty on the strategy is you're just, you guys aren't, I think, sure what you want yet. You've got this big exciting move from San Francisco to Texas, probably a huge upgrade in your, in your lifestyle, I'd imagine, with that move. additional spending money, more space, all that kind of stuff.

A little one on the way. Life is good with all these kinds of things. But fundamentally, I don't think there's been a decision yet about how you guys want to manage your money and what end state you're working towards. As we kind of discussed a couple of times, like, well, that sounds pretty good to make a lot of money and to build a lot of assets outside of work in as efficient way as possible. While we were talking, I think during a quick edit break, you mentioned, that maybe entrepreneurship might be something that could be, or I was able, I think I brought up

entrepreneurship. Maybe that would be one to potentially be worth exploring. Plan A of continuing the career track and both having these higher powered careers sounds pretty good. And you were happy with that. So I think that it's about kind of aligning around those different types of things or aligning around, hey, we're not sure yet. And we want to, we want to just build a flexible position so that we can decide in one, two, three or four years with that. Any of those, I think, our good outcomes. But I think what we'd like to do is invite you to come back on the show in a couple of months or whenever you're ready and you've kind of decided on that next step for you guys and that end goal. And we can probably revisit and then help build maybe some sort of financial

plan that could help accelerate progress towards that goal. Yeah, absolutely. We would love that. And I think having my husband join as well where we can kind of then discuss, you know, what are conversations that we did have together and the outcome of those and what our goals are jointly. That would be great. I think that would be really awesome. Okay. Well, I'm looking forward to talking to you in a few months. And congratulations on the baby.

Congratulations on a killer financial position. And we will talk to you very soon. Thank you very much. Sounds good. We're looking forward to it. Okay. Bye-bye, Madison. Bye.

Scott, that was Madison and her fantastic, amazing options. And, you know, I can hear somebody listening who may not be in the same, quite same position as Madison and her husband saying, wow, what a really big problem to have. But it kind of is a really big problem. She's not got any debt. We didn't talk about this, but she and her husband were both athletes in college, so they didn't have any debt from coming out of college. they've been living in the high cost of living area of San Francisco and have recently moved to Texas.

So they've got money kind of, they've got housing figured out. They're in a lower cost of living area. They've got this great income. And now it's where do I direct the money to go? And, you know, I don't want to say the wrong move, but a move, you know, moving this way means you can't also move this way. So if you move this way, maybe you don't realize some of the way. the great returns that a different option can have. I really liked that you pointed out that real estate isn't just jump in with both feet.

I mean, you could, but that's not the right way to do it. The right way to do it is to spend 500 hours learning about it. And that's, you know, not as easy as throwing money into the stock market. So, you know, clarifying what their goals are, I think it was really, really spot on for you. Yeah, I think I think that real estate investment, in, in this, investing in general is a decision about cost benefit analysis, right? And the cost benefit is a time and money component. And these guys, because they're doing really well, have a high dollar per hour value of their time with this and have a winning formula in hand with what they're doing.

So again, I think it comes down to what are your long-term life goals? How do you back that in there? And I think this was a super valuable episode because figuring out what you want is not like an easy task and it takes a lot of people a large amount of time and it can be really hard and and this might you know sound sound you know like a good problem with them but because they're very talented and they have so many options it sounds like available to them with the hiring careers and both both of them on strong tracks that that gives them too many options with that and that's that makes it even harder to figure out what you want because you have so many good options in front of you and i think that there's hopefully a large number of people out

they're listening that it might be going through the same thing. What do you want? And if I'm on this track, what's going to happen with that? And that brings me all the way to one philosophical point. If you're not sure what you want, you think you're going to have a ton of really good options in your life, then maybe one logical approach is in the short run, build a flexible financial position with that. Don't dump all the money into the retirement accounts necessarily, but begin diverting some to that after-tax stuff. So you have a pile of money there ready for you. If you do decide you want to exploit an option of starting a business, joining a startup, doing a nonprofit, investing in real estate with that. So maybe flexibility is the right theme if you're not sure on your life, long-term life goals

and you want to spend a year figuring that out because there's nothing wrong with that. What do you think about that, Mindy? I think that's a really great bit of advice, Scott. Yeah, create a financial, flexible position. You don't have to have all the answers today. but the same, you know, the same first two lovers apply. Spend less than you earn. If you're earning a good income, this is going to be fairly easy.

Just don't spend every dime you have. Earn more income. If you are earning lower income, look for ways to generate additional income, a side hustle, a second job, you know, ask for a raise. There's a lot of ways to earn more income, but you have to look for them. just going to plop into your lab. Hey, do you want more money? You have to figure that out. Take what your, take the money that you are saving, the delta between your earned income and the spending and invest that wisely. The index funds, low cost index funds is a great place to invest

when you're not sure what you want to do unless you're thinking about investing in real estate, in which case, Scott, this is a topic for another decision, or another, Oh my goodness. Scott, this is a topic for another day, another show entirely. But, you know, maybe the stock market isn't the best place to park your money if you're looking to buy a house in, you know, the next one to three years. But there's there's a lot of options available. And just because you have a lot of great options doesn't mean that that makes the problem

any less. Having a good problem to have is still a problem. You still have to solve it. It's just not as daunting a problem. problem as, you know, oh, where am I going to, how am I going to pay off my debt? Yeah, I wish I, I would kind of come back to this line of thinking while we were still, while we still had Madison here, because I think, I'll send her a note with this, but I think that's, that's kind of, I think, how I would be thinking about it.

If I'm truly unsure, I'm going to build a flexible after-tax investment position with this, give myself that runway from a financial perspective so that there's, there's assets out there that I can tap that are not inside the 401k and I'm going to have to access through penalty or inside the home equity that I'm going to have to borrow against in order to access with that. There's stuff that I can I can harvest right now to go and pursue some of those great options that may materialize in the next couple of years. That's probably the right approach as a theme in that situation. Not to an extreme extent, but just to kind of tend towards that.

Okay, Scott, this one went a little bit long today. Should we get out of here? Let's do it. From episode 260 of the Bigger Pockets Money podcast, he is Scott Trench, and I am Mindy Jensen saying in a switch, witch.