BiggerPockets Money Podcast - 266: Finance Friday: How to Pay Off Bad Debt + When Is Life Insurance Worth It?

Episode Date: January 14, 2022

Bad debt is more common than it seems. Many people you know have a car loan, personal loan, credit card loan, or some other form of high(er) interest debt. If you find yourself with bad debt, the first thing to do is formulate a plan to get rid of it, unless you want your savings and potential investments to suffer the consequences. Today’s guest, Stephanie is in a financially solid position, but she has some bad debt to take care of. She’s on her way to financial freedom by forty after already owning a home and having some retirement investments growing in the background. But, her $13,000 window loan at ten percent interest is causing leakage of investable cash flow.  Yet, Stephanie may be in a better position than she thinks. Since buying her house, she’s seen a big increase in her property value, which may enable her to secure some lower interest financing to pay off her window loan. Scott and Mindy also help Stephanie develop an expense tracking plan, debate whether or not whole life insurance is worth it, and put her in the driver’s seat to become a cash-flowing landlord only a few short years down the road!  In This Episode We Cover The importance of tracking your expenses and why every dollar needs its place  Good debt vs. bad debt and how to know whether or not an interest rate is too high HELOCs (home equity lines of credit) and using them to pay off bad debt Whole life insurance vs. term life insurance and which makes more sense for you Whether or not that bathroom upgrade will have a positive ROI Becoming a financial expert slowly through podcasts, books, and enjoyable education And So Much More! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money Podcast, show number 266, Finance Friday edition, where we talk to Stephanie about starting down the path to financial independence. There's a lot of different options. There's a lot of hybrid solutions you can do. You're the only person that has to work for. So there's a lot of different options available. You just have to figure out what works for you. And the fact that you're thinking about it at all puts you head and shoulders above so many other people.

Hello, hello. Hello. My name is Mindy Jensen. and with me as always is my kind of looks like he has a black guy, co-host Scott Trench. You know, I think it's really in style, stai these days, Mindy, the sye.

That was terrible. I enjoyed it. He has a stye. But it really looks like he got punched in the eye. Either way, 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, going to make big time investments in assets like real estate, or simply get an overall understanding of personal finance and get started. 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'm super excited to talk to Stephanie today because Stephanie is basically right at the beginning. She doesn't have a lot of debts,

except for one with kind of a criminal interest rate. I'm very angry at the window. that's charging her 10% on her window loan. I hope they, like I say at the end of the show, I hope they stub their toe every day for the rest of their lives. I think it's awful that they're charging so much. But we've come up with a plan for Stephanie. Stephanie is at the very beginning of her financial independence journey. And since this is the very beginning of a brand new year, I thought it would be great to

have her join us today to share her story and her numbers. so other people who are also joining us for the first time or just on their beginning of their journey to financial independence could learn alongside her. Before we bring in Stephanie, I need to tell you that my attorneys make me say 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. Scott, what do you think of today's episode? I think there's a lot of, I think there, what I think was great is Stephanie is, has good instincts,

and she's doing a lot of things right. She's built a reasonably positive financial position here. But I think she is diving into the world of personal finance here. And it is another language. I'm sure a lot of us have gone through that where it's just overwhelming. Like, what is a Roth versus, I mean, she didn't ask this particular question, but like, I can imagine someone new to this thinking, what is it a Roth versus a 401K? What's a he lock?

What's, you know, like, why should I track and budget my expenses with that? You know, how long does that take? Is it really the, like, it could be done in 10 minutes or is there a four to eight hours slog to get it done right the first time and set up and maybe iterated on a few times with that? Like, all of these little things are wrong. hard individual decisions that many of us have long ago mastered, but I think are really overwhelming to folks with that. And they're very powerful and need to be put in place. But it comes down to this is a 100 to 150 hour investment, I think, of time to learn all

the ins and outs of personal finance. And you have to want to do that and understand that the payoff of that is millions of dollars in lifetime wealth if you're doing that in your 20s or 30s. And I think that's where that was the best. advice we could give Stephanie today was really go and develop those frameworks and understand why behind all these nuanced decisions by putting in that time over the next six months to a year, casually, passively, just a couple of minutes a day. And she'll get there with that kind of stuff. And then secondly, it was fun to dissect the position because there was a lot of items in there

that we thought we could potentially optimize with, you know, based on our understanding of the basics of personal finance. So hopefully folks will get a lot of tactical knowledge about moves that were made there that will kind of reinforce principles and how we think about certain aspects of personal finance and reinforce the idea of, hey, just continuing to listen and learn is probably the best way to master all of these things gradually over the course of a six month to a year-long period. Yep. This is not a, oh, I think I want to fix my finances.

So I'm going to tomorrow. It's a process. And taking the first step is deciding to. to fix your finances. You have to make the decision that you want to get better with money. And then you have to actually do it. Track your spending. Spend less, earn more. I mean, we talk about pulling the four lovers. We don't get into discussing the four lovers today, but this is going to be a really great first start. And if you're listening to this show, thinking I want to get good with my finances, think about how you can take the information

and the suggestions that we give Stephanie today and apply them to your own personal situation. Not everything is going to apply to you the way it applies to her. Some things you will have that she doesn't, but you can take information from this episode and apply it to your life and come out on the other side with a good, solid plan to start yourself. Tax season is one of the only times all year

when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in

one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code, pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all in one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com Code pockets. I love Matt, said no one ever. Nobody starts a business thinking, you know what would make this more fun,

calculating quarterly estimated taxes? But somehow, every small business owner, ends up doing it. Your dreams of creating, selling, and growing get replaced by late nights chasing receipts, juggling invoices, and wondering if that bad sushi lunch with Scott counts as a write-off. Change all that with Found. Found is a business banking platform built to take the pain out of managing money. It automatically tracks expenses, organizes invoices, and even preps you for tax season without you doing the heavy lifting. You can set aside money for business goals, control spending with virtual cards and find tax write-offs you didn't even know existed. It saves time, money, and probably a few years of life expectancy. Found has over 30,000 five-star reviews

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Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger 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 as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across

business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP Money. Stephanie is on the path to financial independence. She's 29 years old and would like to reach financial independence by age 40. Our podcast has interviewed literally hundreds of people who have reached financial independence

within 10 years of starting their journey. So her goal isn't at all out of the question. But I want to read some of the things that she shared in her application. We have a form for you to fill out when you apply to be a guest on the show. That form is at biggerpockts.com slash finance review if you'd like to apply. And one of the questions is list your investments. Stephanie's first line in her answer is, I have no idea what I'm doing here. Now I'm going to stop right there.

My friend Zena Kumach tweeted something that I thought was rather profound yesterday. She said, learning about personal finance is like learning a language. It takes time and practice. Don't assume that learning personal finance should be easy. If you wouldn't blame yourself for not knowing how to speak a language, don't blame yourself for not knowing how money works. So Stephanie, don't blame yourself. We're here to help. Okay, back to Stephanie's application. Another question we ask is about the challenges you're facing. Stephanie said simplifying everything. It seems so simple, but I'm struggling. Right back to Zina's tweet, don't assume that learning personal finance should be easy. That's okay, Stephanie, we got you. That's why you're here. We're going to help you out. Scott and I didn't just learn this yesterday.

It's kind of this lifelong learning. And I'm also going to stop you right there. While you and Scott might be slightly close in age, Scott is an anomaly. Don't even think about Scott. Sorry, Scott. You're CEO. You don't count. Another question we ask is, do you have a budget?

Stephanie responded, not currently, but kind of. So I really like that B word budget. And the follow up to that question is, do you track your spending? And she responded, I have before, but not currently. So all of you regular listeners know that I'm going to make her track her spending. So with this in mind, I want to say, Stephanie, before we start, this is not going to be. a wow look at all the things you're doing wrong what a terrible person episode this is going to be a let's start at the beginning and get a plan in place to get you good with money that sounds great

so stephanie stephanie welcome to the bigger pockets money podcast thank you i'm happy to be here okay well we start off this episode with the profit and loss income statement what is your income And where does it go? So I make about a little over $68,000 a year annually. And then I guess as far as that, it's like car insurance, gas, food, utilities, mortgage, and a large window loan because I live in Florida. And impact windows are a must. Okay. Okay. So your monthly after-tax is about $4,500.

Yes. And do you have any additional income? I do. I have a, my boyfriend moved in a few months ago, and he gives me an additional $600 a month for rent. Okay. So your monthly total income is $5,100. Yes. Okay. Let's look at your expenses. Can you give us a little bit more context as well about this?

You live in Florida, and what is it you do professionally? Oh, I am an environmental engineer, and I work with a small consulting firm that does a watershed modeling and vulnerability assessments for, you know, coastal threats, rainfall threats, those kind of things that need to be modeled and assessed. Great. And do you, how much, you know, we know we need to get better control of spending. We'll talk about how to track spending and all that kind of stuff going forward. But how much would you guess at the end of each month is piling up in your bank account?

Are you on average saving $100, $500, $1,000? What does that look like for you? Saving, I think it looks about $500 if I don't go over and have a trip to home goods that fulfills everything I want in my home, but nothing I want in my bank account. Step number one, stay away from home goods. So I'm going to mentally think of that as about $3,000 a year, somewhere in that ballpark and savings. Is that a reasonable kind of assumption? Yes, yes, because I am trying to focus more on paying off some debt and getting, we can probably talk about this later, but the PMI off of my home loan, that would be a nice thing to not have.

So trying to throw more money at certain things to then save other things. Well, now we can go to Mindy's question with that. What are your investments or assets and debts with that? This is your net worth statement. Oh, I haven't actually calculated it. But assets would be, I guess, my home, but I have only about 8% in that as far, or 8.2% equity. and then other than that, I mean, oh, I have an account that's a traditional IRA that I'm getting transferred to a Roth, and that has about $18,000 in it.

And then I have about $12,000 cash savings and another $1,800 in a brokerage account that I thought was $1,000. being invested and it wasn't. So it was just like a cash savings account the whole time. Okay. And so we've got about $30,000 in liquid assets or, you know, between your retirement account, your cash savings and, um, uh, this brokerage account. Is that right? Yes. Yes. Awesome. And then what, what kind of debts do you have against those? Um, well, owing on the home, I still owe about, um, 180,000 on my home. and then I have another, my impact window loan, I still have another 13,500 on that. So those are my big debts.

Do you have any other debts besides this? No, no car loans or anything. So great. You essentially have, I'm going to think of those windows, the window loan as part of your home mortgage with that. What's the interest rate on that? Oh, that's 9.9. Okay, I'm not going to think of that as part of your home mortgage.

That's a higher interest rate. Well, so first thing I want to acknowledge is, you know, I'm sensing that you feel a little overwhelmed by the vastness of the language of personal finance and the, and in all of the different decisions that we need to make across the spectrum to get to, you know, to feel comfortable with every choice that we're making with that. So I think a good goal for today's session should be how do we help you come up with something that is very simple that you can do for the next six months that will almost certainly be a good choice for your financial position. And then how do we help you in general build yourself a toolkit so you're able to make all of these decisions with confidence about what you're investing in, how you're investing in there, how you track all of this kind of stuff and how you can measure progress against

that. And again, want to continue to acknowledge, like, this is great for considering your, you're, it sounds like you're very new to this world of personal finance and learning the ins and outs of these types of investments and this kind of stuff. Accurate. Well, great. So the first thing, you know, you want to become financially independent in 12 years or 10 to 12 years, right, with that. And to do that, we're going to have to invest. But before we invest, we need to think about attacking bad debts. and building an emergency reserve with that. And what stands out to me, based on what we just discussed here, is that you have this window loan of $13,000, $13,500, at a 10% interest rate, 9.99%.

Is that what, is that correct? Yes, that is correct. So there's not much in, there's not much that I can think of from an investment standpoint that has a better return than a 10% interest rate that's guaranteed. You're guaranteed to get a 10% interest, uh, return. turn if you pay off your debt versus, you know, invest in another asset class. So to me, that looks like a really good place to start. And Mindy and I were chatting earlier, and she had a

really good thought where, hey, why do we have a $12,000 or $13,000 cash savings position and $13,000 in what I would call bad debt, you know, a 10% interest rate is a high interest rate. It's not a favorable one with that. So one place to start here would say, you know, maybe you take all but 2,500 or all but 5,000 of that cash position and pay off this debt and then apply your savings that you're generating to this debt on top of that, the extra $250,300 bucks a month that you're doing. That's a really easy decision to make that simplifies everything. It will probably take you three to six months between.

paying off the the using some of that cash position to pay off that high interest debt um and in those three to six months we can work on building you know a toolkit for you um to think about all of the personal financial decisions that you need to make um through a reading list some audio books um we will be um so cocky as to recommend maybe listening to some of our older bigger pockets money podcasts uh or maybe some other podcasts on personal finance out there as well um and just by absorbing that you know, for half an hour, an hour a day with that over the course of a six months, you should be able to gather a ton of frameworks so you can think about what is the right amount for an emergency reserve? How should I do an IRA or a 401K? What should I invest in

within those IRAs or 401Ks? If I'm going to do index fund investing, what does that mean? What do I need to be prepared for psychologically? And how does I think about that from a long-term perspective with that? How do I get the PMI off of the mortgage? We can talk about all of these things today, but I think of reinforcing them with some cadence of self-education over the next couple of months would be my biggest tip to help you kind of get comfortable with that. So aside from that, I'll put that as my most important suggestion. And then we can talk about each of the line items that you do have and try to answer them as best we can on the call today with all those other decisions.

Okay. That sounds great. Okay. And I agree with everything that's got just said. So, okay, so let's, let's, what are some of your questions? Well, let me, let me try this again. Are your questions more generally, like, how do I begin putting together a plan? I don't even know what questions to ask, or do you have some specific questions that you'd like us to answer on the call here?

I guess my biggest question was kind of where to focus and, um, paying off that window loan to then free up myself to focus on something else. It's kind of, kind of already answered that for the most. part, but then what do you focus on next as far as I do own a house and it's in a super rentable area. Like I went in way under what I was allowed to get for a mortgage, got a house that I was comfortable living in. It was actually renovated, but it's still 100 years old. So it does need some things.

My washer dryer is like very tiny. Is that something like, I guess, is that worth updating spending money to do that? when I should maybe be focusing on saving for a down payment for a duplex or something that, you know, I guess I don't know where my next steps are. And maybe it is just the education that you're talking about. And I'm jumping three levels ahead of where I should be. Let's talk about this. Step number one, I agree with Scott, should be paying off or at least significantly paying down

the window loan. What is your level of comfort with your emergency fund? A $12,000 emergency fund is awesome. And this is like every time I start to think of something, I'm like, oh, wait, before that we have to do this. And before that, we have to do this. So let's go back to tracking your spending, which we haven't even talked about, except at the very beginning.

But how much does it cost you to live every month? You think it's about $4,600. Where in your spending can you cut? first of all, stop going to home goods. That is like, and I'm not trying to be mean. No, I know. I went to home goods the other day and I shouldn't have gone because, yeah, you can't walk out of there without spending a whole lot of money because everything's so cute.

I have never been to home goods. Wow, what a shock, Scott. I bet Virginia has. And this is why you're an anomaly. Yeah. I've been to Home Depot. Yeah, same. It's not the same thing at all.

Same I've been to Home Depot. It is in the plant department. But anyway. if you have $4,600 in expenses, can you get that down to $4,000? Can you get it down to $3,500 without feeling like you're giving something up? Because when you feel deprived, you can go through it for a while, but then all of a sudden you explode and all of your gains are like wiped out with some massive trip to home goods and now you have a brand new, amazing, cute house and your entire savings account is wiped out.

So let's see how comfortable you are with a cash, with a, with a, an emergency fund of $1,000 or $2,500. I would love to see that window loan wiped out by the end of March or April. Okay. If that is comfortable to you, right now, you said you're paying $430 a month to the window loan. So once the window loan's gone, you can put $430 back into your emergency fund every month. And you can build that up pretty quickly. But how much emergency fund feels comfortable?

How secure is your job? How easy could you get another job if, like, do you work for the government or do you work for a private company? A private consulting firm. Okay. So I'm assuming that Florida gets a lot of rain. So there's a lot of rain studies available. It seems to me that you would be able to get a job pretty easily, but I don't know.

I'm not in that field. So these, and these are questions that you have to ask yourself when you're considering your emergency fund. How much money do I spend every month? What's the bare minimum that I could get by with? How easy is it for me to get a new job and how comfortable am I in the job security that I have? So let's say you're really comfortable in your job security.

It would be super easy for you to get another job. And you could cut your expenses down to almost nothing. Then you could have a much lower emergency fund, take that cash savings, almost all of it, pay all or almost all of the window loan off and then you're not paying that horrible 10% interest rate. They should be in jail for charging 10%. Step number two is to go to the HR department and get information on their retirement options. Do you have a 401k at work? And if you do, does the company offer any sort of match? We don't. offer we don't have a 401k.

It is something that the owner has been looking at for a while, but it hasn't actually happened yet. So that's something I'm struggling with is how to kind of do that on my own. Okay. Well, that was easy. Yeah. You mentioned that you are taking a traditional IRA and rolling it into a Roth IRA. Correct. This is a taxable event, meaning you.

You are going to have to pay taxes on the entire amount that you roll over. This could bump you into the next tax bracket. I'm not sure what the tax brackets are. Why are you doing that? So that money, which actually this is going to be, I'm probably losing a lot here. The money in that traditional IRA was actually rolled over from two previous 401ks from previous jobs. So I rolled it over into one account. I honestly thought I was rolling it over into another Roth and it's I don't know where my like

how I understand when I'm researching and looking and I signed it up with a Vanguard account and I thought what I was getting was a Roth and it ended up not being um it would it be better to open a separate Roth and just keep this traditional IRA as it yeah my my instinct is until you have a really good understanding about why you're doing what you're doing to just leave the money where it is, understand what you're investing in. So if it's in a traditional IRA and you want to invest it, you could consider putting it into an index fund and making sure it's invested in something that you think will appreciate long term. But my instinct is to tell is to advise you not to roll it over into a Roth from a traditional to a Roth at this moment in time, unless you have

a fully formed strategy around that because you will pay taxes on that and then you'll get the money into a Roth. I would say if it's in a traditional IRA, you should check this. Is it a traditional IRA that is pre-tax or tax deferred? I would keep it there. And for future investments, if you're looking for an easy answer, again, this comes down to it. You have to do a lot of research to internalize these things because the why is behind it is a fun two-hour discussion if you're like me with that. And so I would say keep it in the traditional IRA for now. Don't change, don't take that money.

And in the future, when you invest in retirement accounts or put money into retirement accounts, put the future money into a Roth IRA would be the simple answer I'd have there for now. But again, that comes down to the personal preference. And there's a lot of nuance behind that. Well, we'll definitely look into that. Yeah. I would say don't make a big.

move by rolling it from a pretext to a Roth right now without, you know, until maybe after that, that a couple of months of really thinking through some of your, the personal finance nuances here. For, you know, zooming out to simplify all of this with this, to get wealthy, you have to do two things, right? You have to generate cash and then you have to deploy it, right? So to that, when we talk about like tracking your spending with this, your income is, is $68,000 plus the $600 you get in rental income from your boyfriend with that.

And that's hard to change. You can always think about changing that by getting a new job, asking for a raise, waiting for the promotion, getting a bonus, whatever that is. But that's not something you can immediately action, following this, take action against following this call most likely, right? If you think there is, then we'd be happy to help you out and go into that. But that's where I think Mindy and I are recommending on the expense side. If you're just in control of that spending, you know where every dollar is going.

And, you know, by tracking it and setting an intentionality behind that, there's probably another $500 to $1,000 in your budget to pick up here on a monthly basis over the next couple of months. You can do that by doing the grind of, you know, tracking your meals out and take out and whatever it is that you're doing on a day-to-day expense profile. But a two-step process that might be more effective would be, great, do that, set a budget and say, I'm going to commit to spending no more than this amount on alcohol and this much on takeout and this much on whatever with that. That will help control to a certain extent.

But even more powerful are things like eliminating the monthly expenses that recur your mortgage payment, like canceling a subscription or reducing your mortgage payments or knocking out this window loan payment with that. And so if you're able to focus on that over time, you can save 200, 300, 300 bucks a month by just being thrifty and controlling your expenses. You can save 500 to 1,000 a month by knocking out some of these payments that are recurring on here with that. And that's where we start with the tracking of the expenses. So that's, I think, a really good, you know, day one, you know, weekend project is to sit down

and say, I'm going to sign up for a service like mint. How do you, how would you go about tracking your expenses? Maybe we can start there. Previously, I used the Every Dollar app from Dave Ramsey. That was okay. That's a great one. But I don't know if I found one for me yet, but maybe it's just me not having that self-discipline and figuring it out.

Yeah, I think a part of it also is like it stinks. It is not fun work. You have to sit down and it is excruciating, especially the first time with this, where it's going to take you four hours or the better part of a day to track your expenses over the course of the last couple of months with that. And you're going to have to figure out the system. And then you have to figure out like what the heck was that payment that with this arcane. Oh, that was a gas station in, you know, Nebraska that I stopped at with that. And that's why I can't figure out what it was.

Oh, you know, and I filled up half a tank because the amount doesn't look. So like, or, you know, and so that that's why like this process is not fun. for that, the encouraging advice I would have for you is too bad. You have to do that in order to, I think, get control of your spending, at least at first, to really understand it and to make some of those changes. And, you know, the tradeoff there is by doing that for the first couple of months and getting comfortable with it and putting in the time to wrap your head around it, you will shave 10 years off of your working career, probably at minimum, from that. that. And so that is a really good return on time, but, but it is not a fun project, if you're like me,

to go through and categorize every one of your expenses. It gets easier and it becomes less of a chore, I think, downstream. Some people genuinely like it. Maybe it would be with you, but that is not me for sure. So hopefully, hopefully that's helpful context with with the tracking your spending piece. Yeah, and I do it two different ways. I started off with a notebook. My husband and I were just like really curious how much like why are we spending so much money and we started I put the notebook on the the countertop which is where I walked in the house every single day. Every time I walked in it was through the garage door and I went to right there where that's where I kept my keys and I would write down I saw the notebook and oh I have to write down my

expenses. So it was a daily thing. It was a multiple times a day thing. And I started noticing a pattern instantly because it was in my face multiple times a day. I made a mental note not to move the expense tracker, and I added it up as I went, and it was rather shocking how fast it added up, and it was rather shocking. You know, the trend, I was always going to the grocery store. Like every day I would go to the grocery store, and that was my spending problem.

When I finally got that under control, we took the Waffles on Wednesday.com wrote an article about using a Google form to make a mobile spending tracker. So it's super customizable. It's literally everything that you, like if you want to have a different category for beer and a different category for tasting rooms and a different category for wings like Scott has, you can make them all the different categories and get as precise and detailed as you want. And as you fill it out on your phone, it goes into a spreadsheet. So at the end of the month, you can just look through the spreadsheet.

You don't have to write everything down. The only issue with that is it isn't in your face and sometimes you can forget. So you have to like every time you swipe your credit card, you have to remember to write it down every time you, you know. But it gets to be a habit and it's pretty easy to make it a habit. Maybe you do a hybrid. Maybe you put the notebook right where you come in every day and you're like, oh, I got to remember. to do my my expenses and you write down when you think of it and you're at the the gas station and you think of it with your phone there and you know it's just it's getting in the habit is

really really helpful there's also an app called cube cube cube it's a digital cash envelope system and you go into their app and you decide how much you're going to put in each little envelope and you use a debit card and you have to to say, hey, on this debit card, I want to pull from this envelope. And it puts all that money on the envelope. And if you don't have enough money in your envelope, you can't make the purchase. And so then if there's not enough money, you have to kind of move things around. So it's not really budgeting or tracking, but it's forcing you to think about how you're

spending anyway. So there's a lot of different options. There's a lot of hybrid solutions you can do. You're the only person that has to work for. So there's a lot of different options available. You just have to figure out what works for you. And the fact you're thinking about it at all puts you head and shoulders above so many other people. Let's call her the top 1% of Americans.

I would agree with everything Mindy said there with that. There are numerous apps. There's this cube thing. There's writing it down in a piece of paper. I used mint.com, which is a perfectly fine net worth tracking application. that's completely free to access, although you will see ads on that. And I use that for six, seven years. Now I use, you need a budget with my wife and I moved to that software once we got married

and merged our finances with that. So, and then every dollar that you've used in the past is also perfectly fine. I think, you know, you could spend two weeks trying to figure out which one of these is the best. I would pick one. And every dollar mint or you need a budget are probably the best, one of the best three to start with. They're probably all fine for what you're trying to do with that. And if you already have paid for every dollar, I'd recommend just sticking with that. I've used that one as well with this.

Man, I am a nerd with this kind of stuff. So that is, that is, but I would start there and just follow the instructions on how they do it. Dave Ramsey's zero-based budgeting works really, really well. and I think we'll be really, really powerful for that. But you need to put the time. Whichever one you choose, you'll have to put in all that time and effort. I like the ones that are digital versus Mindy system a little bit more for me because they automatically get populated each time.

And I can just, I don't have to actually physically write them down, which, yeah. Okay. We'll see. I'll probably definitely use the paid version of every dollar or the paid version of you need to budget or if you want a free version, mint. Mint is, we'll do the same thing, but be free. Okay, sounds great. Good advice. Thank you. So remember, we had two things that you do think about in order to build wealth. One is generating cash, and the second is deploying it, right? So all of this budgeting stuff will help you generate

more cash, or at least not spend as much, or make sure that if you do spend as much, you're really getting the value that you want from your lifestyle out of that spending. So nothing's going wasted. So waste as little of that income as possible. And over the next couple of years, think about, obviously how you can increase that income if that's something that you want to explore by changing jobs advancing at your work whatever that is but we that's the best leverage we can get over your generation of cash is on reducing expenses and by control and the first step to do that is understanding it and then controlling those the next piece comes down to what do we do with the cash that we generate and what you've chosen to do to this point with your cash is you've piled up

a $13,000 emergency reserve a little over 12,000 to 13,000 in an emergency reserve a little over 12,000 to 13,000 in emergency cash savings. You've put a big chunk into these retirement accounts, and you've put a small chunk into a brokerage account. You've also put a down payment on a property and have equity in that property. And that's how you've deployed your cash. And that's actually pretty good. I don't see anything wrong with that to a large extent. And I wouldn't, I don't think you, you know, if you spent, you know, the next year reading up on things, you'll make some tweaks that'll be subtle and very important, but not fundamentally different than what you're doing with this, in my opinion. The biggest deployment of cash decision that we have here, I think,

has to do with that window loan, right? You are at this point, I would say, not an advanced investor. So you're not expecting more than 10% annual returns from your investment profile. And that's why, paying, reducing that cash position in your emergency reserve and paying off that debt to whatever extent you feel comfortable with, maybe leave a few thousand in there. After that, but that makes a lot of sense. That's a much better return than the 0% you're getting in the cash reserve. And the point of the emergency reserve is to avoid accumulating bad debt, like a 10% interest rate.

So that's a really good use of cash is to redeploy it from your savings account to that debt. And as you generate more cash, as you generate the couple hundred, maybe as much as a thousand dollars per month depending on where you think you can get to once you start tracking your spending then you have to figure out that approach and what we think Mindy and i think is is that it will take you a few months at least to pay down the window loan even after you um you know put a big chunk of your cash current cash towards that and from there you know in those next couple of months you need to self-educate to figure out what the next piece should be however we can also give you some ideas

on those last pieces because there probably is a couple of things you can do on the home side to get there. So how you generate cash, how you deploy it. That's how we're breaking this down for you at this point. Sounds great. Simple is great. 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 taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress.

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Whether it's improving cash flow or exploring investment banking solutions. With Desjardin business, it's all under one roof. So join the more than 400,000 Canadian entrepreneurs who already count on us and contact Desjardin today. We'd love to talk. Business. One last thing we didn't talk about is your life insurance and life insurance and long-term savings account. So let's talk about this for a minute.

That's one of those things that I started financial advising, and it seems like a good idea. And from their explanation, it's basically a long-term savings account. And I asked specifically, should I just get like a bonds account and be contributing to that? And they're the financial advising staff told me that this is actually better because it's is it tax deferred when it's you don't pay or you pay taxes up front or which is the opposite the tax deferred means you're not paying taxes on the money that goes in okay it's the opposite of that so or no no you are so you I'm sorry um basically it's it's just better tax wise if you do it through their life insurance because it's the exact same account, basically, that they offer for a long-term investment.

Okay. So my belief is you have been, you have a complicated product that you don't understand in this. Yes. Is that right? Absolutely. Okay. So without knowing anything more, my guess is that you have been sold a whole life or

permanent life insurance policy with that. and you've got somewhere in the ballpark probably of three to $500,000 in coverage, would be my guess. Does that sound something like what has been discussed with your financial advisor? Yes. Do you know what the benefit? Yes. The payout benefit is.

What is that? What is that? Okay. The payout benefit is, sorry, I just had to pull it up. So depending on your age, it goes up. So if I'm, I'm 29, so it starts to be at 30, death benefits 130,000. Okay, so you have right now. So you have really expensive life insurance with this, in my opinion.

And when you think about life insurance, we had a great call with Joe Salci-high. Mindy, do you remember what episode that was? 139. Okay, awesome. So you have biggerpockets.com slash money, show 139 has a great discussion on life insurance with that. My big takeaway from that discussion was, why are you buying life insurance? Like, what is the point, why do you buy insurance for anything, like a car accident? Well, it's in case I get an accident. I want to cover those

types of, those types of payouts with that. And so why do you buy life insurance? Well, I want to buy life insurance so that my dependence or the people who might depend on me are covered and have some sort of financial security in the event of my death. So suppose, you know, let's say your goal is become a millionaire by 40. That says 11 years from now. Well, if you have a million dollars and you're financially free and you said, my family needs a million dollars to live this lifestyle forever, I'm retired at that point, then you need no insurance, right?

I mean, you could buy insurance to continue padding that, but you don't need any insurance from this because you're self-insured. You have built a lifetime of wealth. You don't need a million dollar check because you've already got a million bucks in assets with that. And, you know, as a single person before I got married, I didn't carry any life insurance. I probably, I may never cover life insurance or carry life insurance personally because I have enough assets that I think that my family will not need, need those types of things. So a great

way to think about this is if you're not married and have no dependence, you may not need life insurance. You may want to have a net worth of $20,000, $30,000 so that any expenses that would cover your untimely death get covered and are not have to be covered by your family in putting a burden on there. But you're already at that. You've already got 20 or 30,000 bucks with that. So morbidly, that would cover any funeral expenses, most likely, if you were to pass away. untimely with this. You know, if you get married and have kids, then, okay, maybe then you want to say, I want a one, one and a half million dollar life insurance policy in case I die.

So there is a check there because I'm earning this income that's not going to get generated to fund my family's lifestyle. For that, you can use a different type of policy called a term life insurance policy, which will cost one-fifteenth of this amount per dollar. So, you know, instead of being $160 a month for $130,000. payout, it might be $10 a month for that payout. The difference is, you know, if you don't die during the term, if you get a 30, you know, if you have a, hey, if I die in the next 30 years, I get this benefit, then you don't get

anything. The policy you have now is guaranteed to pay out, but it's 15 to 20 times more expensive. So it's $160 a month drag on your finances. You can't invest with these types of things. If you are a very advanced investor, then may be. be some of the arcane, in my opinion, gibberish that the whole life insurance policy salesperson spouts can be applied to some benefit if you're going to apply an advanced long-term strategy. But there's no way, I think, in my opinion, based on where you are right now, that you're going to be

able to apply that or that you're going to want to apply that. I think it's a very, very low probability that this is a good, that a whole or permanent life insurance policy is a really strong choice in your situation, versus. is a term insurance policy. And again, this is one of those, another one of those things. You've got to spend an hour, a couple hours, digesting this over the course of some of that self-education. A great place to start is that episode 139 with Joe Saul-Sehi,

where he breaks this down much better than I could there. Is that helpful? Yes. I guess I came into that with the same idea, and they basically, which obviously they're trying to sell their product, is also that this was more of an investment account. So my 160 is actually being invested every month. And then there's an annual dividend that I also get from the company into that investment account.

It's just very slow growing, which is how they got me. Because I was like, oh, if it's an investment account and my 160 is actually being used for something, that's a different story than just paying $160 a month for life insurance I don't really need yet. They're trained to talk. really good. Yeah, I know. They sell this product as a great investment and it just might not be. I would ask, and this is a research opportunity. I wouldn't just say, cancel everything, give me all my money back right now. I would look into it. Maybe they have you invested in some amazing product and

your $160 a month is now $46 million. But it's probably not. So I would look, I would do research, ask them questions. What are you investing in for me? How much has it grown? What is this costing me? Because it is absolutely going to cost you money to have it invested with them too. There's got to be some fees involved in there. You're not just giving them $160 and it's growing and they're investing for you by the, you know, out of the goodness of their heart. There has to be fees involved in that. So what is it costing you and what is your current balance and what happens if you decide to stop? Say, I don't want this anymore. I want my money. or I want to stop investing and or I want to stop giving you more money.

Like these are all the questions that you want to know that you want to know what happens when you decide to stop this account. And how long have you had this account? I've only like a few months. Okay. So it's like five or $600 in there. Yeah, it's not. I just started the financial planning process.

So. Okay. Here's the thing. If you don't know what you're doing or why you sign that up for this and you feel you feel like you were sold, I would argue against what Mindy said there. I would bias towards canceling the policy. You can always restart another one with that when you know when you have a better framework. But like if you're going, and this is just general advice for anyone listening, if you're going to a financial planner, you need to ask them, are you a fiduciary to me? And, you know, I would also, and I, and I, I, I will bet you, you know, 97-5-1 that this person was not a fiduciary to you, that this person made a commission by selling you this product, and that's how they earned money with that. A better way, was the visit free to you? Did you have to pay anything? The visit's free.

She did say she was a fiduciary. It's actually, I think with this company, it, you know, it ends up. being that having life insurance feels like it is in my best interest to her. So there's always those kinds of lines to cross, you know? Yeah. I will say I rescind my advice since you have only been there for a couple of months. I would say, just call her up and be like, I don't want this anymore. Cancel give me my money. Because if it is pre-tax, you will incur taxes. It's a taxable event. but it's like 500 bucks. It's not going to kick you into the next tax bracket.

I'm going to exert some executive privilege here with this. Here's some advice. Go to XY Planning Network and look for a fee-only financial planner that you think, you might like from there, and schedule a virtual or in-person call with them. And bigger pockets will cover the cost of that first call with a fee-only financial planner with that because I bet I bet you that that person will be able to in that next level get you a deeper dive into into whether this is a good good bet and I'll bet I'll bet like I said

97 a half to one that the right move is going to be to likely to cancel this insurance policy and restart with either a term policy or no policy with that but we'll see okay that sounds great thank you yeah we'll work all of that out outside of of this call. But yes, I've got that. I'm taking notes on all of your steps to, to work on. Me too. Thank you. Okay. Scott, now can we talk about her house? Yes. I'm sorry. That's okay. That's okay. Okay. Stephanie, let's look at your house. What does your, tell me all about your house. What kind of beds and baths? Is it Airbnb-able? You said it was in a rentable location. tell me all the things.

It's in Florida, and a lot of my neighbors are renters. It's not, I wouldn't say it's Airbnbable because there is like the other side of the train tracks is where all the other Airbnbs are, so it's not a bad neighborhood, but it's not high priority where people would stay to be closer to the beach. I am technically still only a mile from, or two miles from the beach, though, so possibly. it's a 3-1, which it's a 100-year-old house. All of them in this area are actually two ones. So the 3-1 was, the garage has been turned into a third bedroom.

I've been looking in to see if it was feasible to get a second bathroom or even a half-bath. At the moment, it's just not. It would be very, very, very expensive. But the things I want to do to it, even to make it more comfortable in while I'm, like, sitting sitting in it staying planning for the future and maybe a future investment property is getting a full-size washer dryer which wouldn't fit in the house I'd have to close in a back patio put it outside um which is I was told it's already going to be like $1,500 in um just permits so that's going to be an expensive endeavor as well and then I really want a bathtub especially

if you're renting it, it's a, it's a decently low-income neighborhood and there's a lot of families. So if I do rent it, someone's going to want a bathtub, not just me. So that's kind of where I'm at with the house. My PMI is only, it's actually, I just looked into it. It's only $50 a month, which is worth it for right now, but still something I'd rather not have. I should focus on the windows and then maybe work on the PMI. But yeah. What do you think it would rent for if you moved out?

I've been looking. It would rent probably 15 or 1,600 a month. Great. And when did you buy it? July 2020, right before the whole market went up. Oh, nice. Yeah, like right before. Scott, are you familiar with a rate and term refinance?

No, I would love to learn about this. Oh, I don't know either. I was going to ask you because I wanted you to talk about it. You have PMI, which stays on the loan until you have the equivalent of 20% equity. If you bought it a year ago, it's entirely possible that you have the equivalent of 20% equity, but you can't request that the PMI comes off unless you refinance, which isn't going to make much sense because PMI is only 50 bucks a month. I wonder if there's another way except with, like, I wonder if you could pay for an

appraisal. If you're a lender and you're listening to this, let me know if there is a way for her to potentially get her PMI removed. She has a conventional loan. It's a 30-year, 2.875 rate. So she isn't really excited about getting rid of that rate. or doing a refinance and incurring all of those costs just to get rid of her $50 a month PMI.

So if you know of another way to do this, please hit me up, Mindia Biggerpockets.com or comment in our Facebook group, which can be found at facebook.com slash groups slash BP money. Okay. What other things can we talk about, Scott? Well, let's keep going. Let's stay on the house here. So you've got, how much do you think the house is worth right now? So initially it appraised for 220, and then, you know, once the market started going up, there's another 3-1 down the street that went for 250.

And there's a two, two, three doors down that's about that they just put on the market for like 340. So I'm thinking like maybe 260, 280, if I'm lucky is how much it would the house. And your mortgage is 180? My mortgage is 1,200, 1225. Sorry. What's the balance? Oh, mortgage. Sorry. Yes. It's I've, it's 180. Correct. Okay. So that actually changes a couple of items for me. I didn't realize you had that much equity. I thought you had 8% equity with that. You have much more than 8% equity. You have 50% equity. Yeah. How so? Yeah, you have about $7,000 in equity in the property because if you sold it, you would pocket.

at 250, you know, after closing, before closing costs, enough to get all that stuff. You'd sell for 250. You'd pay off the mortgage in 180, and you'd pocket $70,000, minus transaction costs, right? And those would be substantial. Those would be like, you know, let's call it 25,000. So you'd pocket somewhere in the ballpark of 45 to 50,000 on selling this property. Okay, that actually changes a few things. So that, you know, I told you that the ways to build wealth were to generate cash and then deploy it. Well, you also have built wealth with, you know, with this deployment of cash, with, you know, your net worth has increased. And so that gives us a few more minor options to kind of play with here with that. One is

thinking about a refinance. It probably doesn't make sense to make to knock off $50 in monthly PMI, but it is something to, I think, ask in the BP Money Facebook group, or we can ask that for you and see if any lenders have any advice on what to do, since you do have so much equity in that property, there may be some options that were just not quite in tune enough with the world of mortgages to discuss here on the show with that. Second, you can consider what's called a home equity line of credit or HELOC, H-E-L-O-C, and that could be a really good option for you to say, great, I'm going to use 7,000 of my cash savings, my 75,000. from that $12.5 in cash savings. I'm going to pay down my window loan with that. And then I'm going

to take out a home equity line of credit. Take out, and you'll probably get approved for somewhere in the ball. You may get approved for some of the ballpark of $20,000 or $30,000 for a home equity line of credit with that. That will be at a low interest rate, like 3 to 4%. And you can use 5,000 of that, a very small chunk of that to then pay off the remaining window loan. and then you can pay off, you know, so instead of paying a 10% interest rate on that window loan, you're paying a 3 to 4% rate on your home equity line of credit. So that would be another option to pursue there to talk to your local banker. Again, one of those things that I would spend a few hours listening to some podcasts or reading up

to get familiar with what is a HELOC and can I use that and where can I go get one. But that would be, I think, a potential option for you that has materialized knowing that your property might be worth $250,000 instead of $188,000. So that's great. Yes, I was going to suggest that as well. Take that, get a he lock and pay down your window loan completely. Pay it off completely and then pay off your helock. Now, your helock might be, you might be approved for $25,000.

You don't have to borrow all of it. It's like a credit card where you can borrow some. and then pay it back and then borrow again and pay it back. Whereas if you did a cash out refi, you take out the entire amount, take out the entire amount and then when you pay it back, you don't get to borrow it again. So it's like this line of credit. It's this amount of money that you're able to borrow.

Now, they could close it out. That happens rarely, but it's just there available for you to borrow. And I recommend not borrowing it unless you need to. and it's a short-term loan. I wouldn't borrow it for long-term money, but if you need a quick pay off your window loan, then you still have your cash available, your cash cushion. And that's your only debt, right?

I would not use it to, that's your only debt. I learned from you guys not to take out a car loan, so thank you. Awesome. So let's, so let's kind of summarize what we've discussed here so far with us, right? So first and foremost is, you know, think about it as how do I get 10 book equivalent, the equivalent of 10 books under my belt. That's 100 hours of passive learning about personal finance and over the next year, right? That's an audio book in the car once, you know, once a month or a podcast in the morning when you work out or whatever that looks like to you. just getting some sort of way to absorb this stuff so that it's not all a foreign language with that.

And then in the meantime, we have generate cash and deploy it with those two things. On the generating cash thing, it's all going to come down to expenses for you in the short term, right? You can always think about the career moves later with that. The biggest, you know, the biggest, the first step is just tracking your expenses and getting control over the day to day. There might be as much as $200, $300 a month, maybe more in there just from that. with that. We said, if you remember that we were saving 250 to 300 a month, maybe it was a good ballpark guess as to what was currently going on prior to this call. So if we get another 300, that's $600 per month in savings. Let's call it 500 a month in savings to be conservative with that.

This window loan is killing you. You're spending $430 a month on it. And if you can wipe that out and refinance with a HELOC, that might get, you know, maybe you spend $7,500 from your cash position, knock out big chunk of the window loan and then take out the remaining $5,000 in a he lock, that might knock down the amount you have to pay on that from $430 to $100 per month because you're paying on a much lower interest rate and a much lower balance towards your helock. Great. Now we've increased your savings by another $300, right? So now we're at $800 a month in savings.

If we cancel this life insurance policy, then that's another $160, which brings us to to $960 per month in cash saving with that. And I think those are all really potentially achievable items for you in the next three months that you could get to. And now you're saving $1,000 a month. That's $12,000 a year. That's enough for another down payment if you want to do another move into a property and fix it up and live in it and rent out, you know, the bedroom, a couple of bedrooms.

Keep this one as a rental, right? Now you've got, now you're beginning to start a portfolio. That's enough to fully fund an emergency reserve with that. That's really stable. And think about just aggressively pursuing other investment options. You may find you're able to start saving more if you're able to than what I just described there, especially as you pay off the HELOC and get rid of that extra hundred bucks on that, on that debt with that.

So a lot of options begin to present themselves with that. And there will be, I think, more that kind of netherly. next level of decisions to make about how you want to invest or allocate your portfolio going forward probably sometimes towards late summer, you know, fall of next year in 2022. We're recording this in late 2021, this will release in January 2022. But there will probably be some good options for you in around that time, like September, October of this year. How does that sound?

Does that sound rational or like it makes sense and is achievable? Yes. Definitely a lot more research to do. But like I've heard the word helic. I've never thought in my mind I would look into it for myself. So that's kind of exciting. Thank you. Now that we have helic money available,

I would suggest looking into getting quotes for putting a bathroom in the garage bedroom. The reason being if you are to. miles from the beach and you can rent out your house for six nights a month at $100 a night or 12 nights a month at $50 a night, somebody else is paying your part of the mortgage and now your housing cost is zero. If they have their own bathroom, then that's better because I don't want to share an Airbnb with somebody that I have to share a bathroom with. I think that's gross. I'm, call me a diva. I don't care. I want my own bathroom when I go to an Airbnb. And I specifically choose Airbnbs that I don't have to share a bathroom with. I think that a lot of people are like me.

And I'm sure you're lovely and wonderful in every single way, but I don't want to share a bathroom with you. So, um, having that bathroom could help you like if it's going to cost $50,000 to put a bathroom and don't do it, that's not worth it. But if it's going to cost, I don't know, $5,000, how much is the bathroom cost? I'm so out of touch with how much a bathroom cost because I do it myself. I was told definitely over 10 the way my house is laid out. So, yeah. I would get a couple of quotes. I mean, if one guy says, they may have some sort of complication with plumbing. Yeah. I think Mindy is right that they're, that that's, you have to think about what is the highest and use of this property. And can I invest 10, 15, 20, 25,000 into the property to allow it to generate more

rent or become more valuable when I move out, especially if the plan is to potentially buy more rent of properties? That's a really good idea. But I definitely don't think that's a short-term move for you. I think that the first couple of steps would be getting out of that window loan by paying it or refinancing it with a helock, doing a lot of research, getting comfortable with that financial foundation, and then putting together this as the next piece to that. But yeah, if you're able to get a really strong savings rate in three to six months with that and you feel like you're in command of those types of things and you've got this helic available and you're like, great, if I had a bathroom onto that bedroom, I could generate 200 to 300

bucks a night on Airbnb, that might be a great move. It would be a gamble. But, you know, I would definitely say that would be something to spend another 50 to 100 hours thinking about prior to executing on because it'll be a big risk relative to your financial position currently. But that could be a great, a great option with that. That is your biggest asset is this house. Yeah. And I'm, I'm of the mindset that even just making this a 3-2 instead of a 3-1, or even a 3-1.1 bath. Just add. another bathroom is going to even make the value go way up because there aren't a lot of those in this neighborhood. And that's why there are houses down the street selling or, you know,

listed for $100,000 over what I paid, that kind of thing. Yeah, yeah. Two toilets is always infinitely more valuable than one toilet in a house. My wife was very thrilled when we moved to a place that had a second toilet. Yes. I'm rightfully so. Okay, out of the bathroom into different types of real estate. You have mentioned saving up a down payment for a duplex. Is that your goal to become a real estate investor? Yes. My real goal is to have a lot, like some kind of passive income.

Real estate investing, like I kind of love it. Like I love the house hunting. I love like properties, even like old historic ones. that need help. Like I want, I want to help them, but I also don't know how to fund that situation to make it worth it and not just like buy a house that needs a lot of work because I love how old it is. Like, it's not a good investment either. So, okay, let's see, where are my step six? Step seven, watch the movie The Money Pit with Tom Hanks and Sheldon and Don't buy historic houses is my personal recommendation. But if you enjoy really,

estate while you are saving up for your next down payment, I would say, see every house that's available, go to every open house. When you're not in a position to buy, I wouldn't take your real estate agent and take their time to go see all these houses. I would absolutely reach out to the person that helped you buy your house if you like them and want to work with them again. I would reach out to them and have them start sending you listings. go to every open house there is.

And when they ask you, do you have an agent? Say yes, unless you're looking for a new agent and then say no. But if you have an agent that you like, get listings and start looking and start watching the market and seeing what's going on the market, seeing what's selling and for how much. That just because they listed that house down the street for 260 doesn't mean it's going to sell for 260. Maybe it sells for 280. Maybe it sells for 220.

You want to keep an eye on what's going on. If you want to buy in your area again, send out letters to every house that looks interesting. Hey, I'm looking for a house. I'd like to buy yours if you're thinking about it. Or do you know anybody in the neighborhood who's selling? I live down the street and I would love to buy another house in this neighborhood and see what happens. I mean, there's a lot of people that are sending out those same letters too and you never know which one's going to stick. But starting to look and starting to learn the market again because the market,

that you bought in a year ago isn't the market that you're in now, which is unfortunate. Yeah, very, very true. So continue to learn the market and, you know, see what houses, if you want to Airbnb houses, go see where the houses are Airbnb being the most. Like, if it's a mile away, start looking in that neighborhood instead and get, you know, find that sweet spot where it's super affordable and also super desirable. Sounds great. Thank you. Agreed. I'll just piggyback on that and say it's the same framework.

work here. You know, it's several hundred hours, you know, if personal finance is 100 to really master the language or get to learn, get to know it well enough to feel confident, real estate might be 250, you know, of that to really feel comfortable. What is cash flow? What really does add value? How do I know my market and what makes sense with that? And so that would be the investment of time. I'd be prepared to commit going into that. I obviously think it is a great avenue to build wealth and do it personally with that. So would be fully supportive. of you pursuing that, just know that that's the kind of this next year, I think will be one of fortifying your financial position and getting things ready so that you can make those

kinds of investments in 2023 and beyond. Would be my estimate. Awesome. That really sounds great. Definitely that this is exactly what I needed. Awesome. Well, I think that this is a good start. And I think in six to nine months, we need to circle back and see what you have accomplished.

Celebrate the paying off of that window loan and go on to the next step. I'm in it. Awesome. Okay. I'm going to send you a note then in about six months. Yeah. I'm going to send her a note in six months. I just need to make a note here to myself to send that note.

But yeah, this is going to be great. The fact that you're paying attention, the fact that you actually want this to happen is huge. Now you have to take the steps, but we've given you several things to look into. The steps that I have written down are pay off the window loan. Leave the traditional IRA where it is until you have a reason and a plan for rolling it over into the Roth IRA. It's not a bad idea to roll it over into the Roth if you have a reason to do so. But just because I heard that I might want to is not necessarily reasoned enough. So let's come up with a plan.

And that's something that, like you can do that anytime. Step number three. Or with her financial planning session. Yes, yes. Talk to your financial planner at XY planning network, which is step five. We haven't gotten there yet, Scott. Step number three is specify the brokerage account investments. So when you set up a brokerage account, that's a great first step.

But then you actually have to say, I want this money to be invested in this thing. And if it is not yet invested in this thing, it will just sit there until it is invested. So the personal finance community is really big on index funds. It's kind of a set it and forget it. You decide there are VTSAX, the Vanguard Total Stock Market Index Fund is kind of the darling of the personal finance community. It's the entire American stock market. We, of course, can't specifically recommend a specific fund or whatever with that. Yes, we would never.

That's just one that happens to have been mentioned by J.L. Collins with that. VTI. Another one. There's like, yes. There's a bunch. look into different indexes, look into specific stocks, although I would not recommend a specific stock for you personally unless you have a lot of time. Scott said 200 hours for real estate.

If you have 10,000 hours to devote to researching one company, then you can invest in their company. But until then, I would go, I would personally, if I was in your shoes, I would go into an index fund. I'm not in your shoes and I go into an index fund. Step number four is listen to episode 139 with Josal Sihai. Review your life insurance. Oh, I wrote this out before we decided that we hate your life insurance company.

You've only been in there a few months. If I was Stephanie, I would call them up and say, I don't want this plan anymore. Cancel it. Stop taking my money. Give me all the money that you have. This is what I would do if I was you. It is a research opportunity for you. I would listen to the Joe Sal See High episode 139.

and learn about life insurance. And again, because this is so specific with this, we need to be careful from a legal perspective with that kind of stuff. Like all this is entertainment purposes anyways with that. But like canceling the life insurance policy, I would talk to your X, Y, planning network, fee only financial advisor about that. And what I'll say is I bet you,

I'm going to up it from 97.5 to 99 to 1 odds. that canceling that is going to be a smart long-term financial move. There is a tiny percentage of the population that can benefit from that. If you're willing, you know, but I think the profile of that person is more like an executive that's going to work for 40 years and is going to have a specific and detailed plan for regularly borrowing against and adding into the cash balance in that life insurance policy. So I don't think that's you. Yes.

Okay. I will say specifically to Stephanie. I'll leave it at that level of odds. Specifically to Stephanie. However, in a broader sense, if you are listening to this show, if you have a life insurance plan and you're not quite sure what you should do, if you should keep it or not, listen to episode 139 of the Bigger Pockets Money podcast with Joe Saul See High. Review your life insurance plan to see exactly what you have. What happens to that plan if you no longer pay the premium? Does it automatically cancel?

Do you have some sort of investment account like Stephanie does? Does the money stay in the account? Do they write you a check? Like what happens when you cancel all of this? Make sure that you're not making, you know, Stephanie has had this account for a few months. She doesn't have any dependence. She doesn't have a real definite need for life insurance at this moment in her life. So that's why this advice is specific for her.

We would, if we were in her specific position, not continue to pay it. But again, that's a good point, Scott. If you have life insurance and you're listening to this, definitely do a little bit of research before you just jump in with both feet. Step five is we'll talk after the show, Stephanie, to reach out to the XY planning network to get you a session with a planner that you like. And step six is to contact some lenders and look into getting a he lock to help you with step one paying off that window loan.

But yeah, this has been so much fun. I'm so glad you had some time to talk to us today, Stephanie, because this was great. hope that this gives you some steps to take. I hope this has you feeling good about your financial situation because you really are doing great. I mean, you're not sitting here in hundreds of thousands of dollars of debt. You don't have bad debt besides the wind. I mean, you got windows out of it. It's not like it's horrid, horrid debt. They're the nasty ones for charging you 10% interest. They should feel ashamed. I hope they stub their toe every single day for the rest of their lives.

Well, thank you. This was really great. The pinky one, too. I just want to thank you as well. Thank you for coming on the show and bringing this to us. The fact that there was, you know, again, I think you're doing a lot of fundamentals really right, even though you feel overwhelmed. You're making a lot of really good choices here with that.

You're doing something we call house hacking already intuitively by having a place and getting some of your roommate, your boyfriend, to pay off some of that mortgage. you're investing in all that kind of stuff. So a lot of really good stuff going on here. And a lot of, you know, because, you know, a lot of this is new, we had a lot of chances to make some tweaks that we think might be beneficial. And hopefully there, you know, some of those will be helpful. Yes.

Thank you so much. That's what I was hoping for was a perspective that wasn't overwhelmed personally to look at what I have and share your knowledge. Thank you so much. Great. Well, we will be in touch about this list and to follow up in about six months. Sounds great. Thank you. Thank you, Stephanie. We'll talk to you soon. Okay, Scott, that was Stephanie. I'm so excited for her plan. I'm excited for her path. I think she is going to start and take a couple of steps and then take a couple of more steps and then just start running.

I really think she is going to be in a vastly different financial position in December of 2022 than she is here in January of 2022. Yeah, I agree. I think she's doing a lot of things, right? And she's looking to advance her position and figure things out. So I would agree that she's not in a bad position right now. I think she'll be in a much stronger position this time next year. And I'm optimistic, you know, and I've been accused to being too optimistic. in the past for this. But I'm optimistic that if she could make those changes, she could she could

stockpile as much as 10 to 15,000 in incremental cash over the course of the next year, maybe more with that and begin kind of having that next set of options present themselves from an investment perspective. Yeah. I think she is like the world is her oyster and I think she has so many opportunities and she's really, really, really just going to fly by the end of the year. I can't wait to check in with her. Should we get out of here, Scott? Let's do it. From episode 266 of the Bigger Pockets Money podcast, he is Scott Trench and I am Mindy Jensen saying, may your pillow always be cool on both sides.