BiggerPockets Money Podcast - 270: Finance Friday: How to Achieve “Financial Flexibility” on a $65K/Year Salary

Episode Date: January 28, 2022

Financial flexibility is one of the hidden stages along the path to financial independence. When you hit financial flexibility, you have far more choices than you did before. You can invest more, spend more, save more, and work less if you choose to do so. But, this type of lifestyle can only be achieved by being mindful and proactive about where your money is going, as today’s guest Kevin, knows very well. Kevin’s story was posted on the BiggerPockets Money Facebook Group, where he relived the horror of his credit card being declined at his girlfriend’s birthday dinner. This struck Kevin, since he made a decent salary and was relatively responsible with his money. He contributed to retirement accounts and kept a lean emergency fund, so where was all his money going? In today’s discovery, Scott and Mindy walk Kevin through which parts of his budget need a tune-up, and whether or not aggressive loan paydown is worth it for optimal financial flexibility. So where can you tweak your budget to maximize flexibility while minimizing credit-card-induced stress?  In This Episode We Cover How to pay off bad debt fast and work your way to debt-free status  Achieving “financial flexibility” before financial independence and the steps to get there  Tracking your expenses and budgeting for spending (every single month!) How to cut food and eating out spending so your stomach and wallet stay happy  What to do with extra income once you’ve paid off all your debt The importance of a strong emergency fund and always having a safety reserve And So Much More! Learn more about your ad choices. Visit megaphone.fm/adchoices

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Welcome to the Bigger Pockets Money podcast, show number 270, Finance Friday edition, where we interview Kevin and talk about getting your spending under control. Within the next year or so, I'm going to have my credit card's going to be gone, and then I'm going to have extra income to do something with. Obviously, a million things I could do with it. So I'm wondering, what are the best ways to use that? money once it becomes available to me so that I can find the most flexibility. And as Mindy said, the beginning, you know, like detach my time from my money more and more as time goes on.

Hello, hello, hello. My name is Mindy Jensen. And with me, as always, is my chocolate chip cookie loving co-host, Scott French. I'm trying to take a bite at a good response pun to this, Mindy, but it's not working. That was awful. They're all awful. They're terrible. 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, start your own business, or just start building wealth and paying off some credit card debt. We'll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. I am so excited to bring today's guest in today because he comes to us from our Facebook group, which you can join. Join at Facebook.com slash groups slash BP money if you're not already a part of our fascinating

conversations about all things personal finance. It's a lot of fun. We talk about money and people ask questions and you can learn a lot. I've learned a lot from our members and it is a place to go to a safe place to go to ask those questions that you may have about your finances. Anyway, Kevin posted about an experience he had about six months ago where he had gone out to dinner with his girlfriend and some friends to celebrate her birthday, swiped his card, and it was declined. So I reached out to him after chatting with him on the group. I thought his story was really fun and I wanted to bring him on. Yeah, I think we had a great chat with him today. And it's, it was, it's, it's really cool to hear a personal finance story from somebody who is getting started,

but it's had an event transform their mindset with money, right? Like getting a card declined or something like that. I think those are really powerful transformational moments that we go looking for. You probably have noticed when we interview people about their money stories on our Monday shows here on Bigger Pockets Money. And that event is a transformational pivot point where people's behavior and mindset or attitude or the way that they handle or move or capital allocate their money. It changes from there. And it's exciting to talk to somebody who's recently had that event happen and is looking to accelerate. and figure out how to improve and get their finances on the right track, hopefully for life. Yes, hopefully for life. Okay, Scott, let's talk about our attorney.

My attorney, our attorney, makes 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. 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

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their finances with Foun. Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Liener Stronger for Fitness, The Anxious Generation for Parenting Perspective and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more.

All accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over 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 BPMoney. Kevin posted a story in our Facebook group about how he had gone out for a birthday dinner with his girlfriend and a few others about six months ago. And when he tried to put the whole thing on his credit card, it was declined. Bump, bum, bum.

Everyone joked about it and somebody else put it on their card, but it stung. Kevin said, there I was, 29 years old with a corporate job in marketing and communications with a take-home pay almost double my fixed monthly expenses. Yet I had two maxed out credit cards, a student loan, a car loan, and not even enough in savings to cover a single month's expenses if I were to lose my job. Kevin has made huge strides in the last six months, paying off one card entirely, building up a one-month emergency reserve, and starting to play the balanced transfer game to help pay down his next credit card.

But he wanted to know what to do next. So this episode is for those of you who are just getting started on your financial journey, or for those of you with high school or young adult kids who may need young adult kids, young adult children who may need to hear it from someone other than their parents. So Kevin, welcome to the Bigger Pockets Money podcast. Hey, thank you both for having me. I'm excited to be here. I'm super excited to talk to you.

First of all, we need to celebrate the fact that you did not just swipe your card, have a decline to be like, oh, I guess my life is just a life of debt. they'll get another card and try to max that out. You felt the sting and you're like, I don't want to live like this. I want to change this. So you've made huge strides. You paid off a whole card. That's something we should celebrate.

Yay. We don't do the debt-free scream here. But woohoo, you're paid off a card scream. Yay. I think that's fantastic. And I want to say congratulations on that. Thank you very much. And it's kind of funny.

I think the reason everyone was so easily laughing about it was because of just that. Because everyone's like, kind of like it's normal to have credit card debt. Like, ha ha, you made a payment. It hasn't gone through yet. No big deal. And it just didn't, you know, it was a big deal in my head. I was like, ah, this is, I don't want to be here.

It is normal. It is no big deal for a vast majority of Americans. So I'm glad that you didn't like that. And I'm glad that you made these changes. And I'm glad you posted about it because I want to show other people who are listening right now. Yes, it's embarrassing when your card gets declined. And yes, you can change.

That doesn't have to define you forever. and that doesn't have to define your financial situation, you can make changes. And it starts with being conscious of where your money is and where it's going. So with that very obvious segue, Kevin, what's coming in and where does it go? Sure. So coming in is about, I'd say, 3,300 a month, at best take home. So I make about 65 a year, and I put about 10% into a 401k. 5% of that is matched by my employer.

So I put beyond the match. And then 3,300 comes home after that. And about 1900, if I'm looking over here, it's because I have notes. But it's about 1900 of it is the fixed stuff. So like, you know, about 11,200 or 1,200 for utilities, 550 for the car, transportation. So I have like a car loan, car insurance, 125 for gas. And then another 150 on kind of like personal stuff. So like some like vitamins, I have like a compost service.

And then like Hulu, Spotify and stuff like that. And a charity. I give like $30 and $1 to a charity. So that's like the fixed stuff. And then the big variable kind of sometimes black box is like food and going out. And I had, you know, I look back and I had like $250 last month in cash withdrawals. And I'm like, I know some of that was food. Some of that was groceries.

Some of that I could not tell you where it went. It's like $5, $10 here that just adds up real quick. So that's where it's going right now. And then whatever's left has been going to the debt, some months more than others. How would you kind of quantify your average on a monthly basis, the amount of cash you have to go towards debt? Typically, it's probably about $500 extra. Okay, so we can plan on $6,000 a year as a pretty reasonable starting point for now? Yeah, I'd say so.

Awesome. And where is your net worth going? What's it look like right now? It's mostly just in the 401K. I have like a small rollover IRA from a job I had a few years ago that was a 401K. And then I have the current 401K. And then like a small savings account if you count that towards net worth. But yeah, that's where it all is just basically 401K and some cash.

Okay, awesome. And then what if any debts, what were the levels of debt that you have? The debts are, let me look down here. So it's like $7,700 on a credit card. And then I have a car loan that's like 13 and a student loan that's a little over 10. So all in all, it's like 30, like 31. Okay, great. Can you walk us through the interest rates on those debts?

The credit card right now is zero because I just moved it. I just opened a new account and did the balance transfer. So that's 0% for 15 months that started last month. So I have like 14 months left on that, no interest. The car loan is 4.9 and the student loan is 4.2. Okay. I have a couple of questions before we move on. The student loan, is that a private loan or is that a federal loan?

No, it's federal, so it's paused right now. So it's paused. Okay. We had an episode that came out on January 17th about student loans. So if you haven't listened to that one, I would suggest going back and listening, to that one with Robert Farrington from the college investor. That is a really great episode about what you can be doing for when it becomes unpaused, but also some advice on maybe the pause will be extended.

It was extended right before the right between the time we recorded the show and the time that it was released, they extended the payments till what May, May 1st. So they may extend them. again, which would be great for you. You could work on paying down some of this other debt. A note about that 0% interest rate credit card, the balance transfer game that I mentioned in the intro, you can traditionally get or typically get a teaser rate when you open up a new credit card and you transfer a balance.

Now, I know that there was a charge to transfer the balance, but the balance sits there at zero percent. And it only sits there at zero percent until the end of the teaser rate and then the rate skyrockets again. So I would suggest throwing every dime you can at that because what is the interest rate on that when it does come back to full interest? Yeah. The funny thing is it is still going to be sky high, but it's slightly lower than the credit card I just transferred it from. Which is a net win. So supposedly, yeah, I guess. But yeah, you're right. I mean, I'm 100% paying that down before before the end of the promo period. And the fee on it was like three and a half percent for the transfer fee. And I did the math on that. And it was like, you know, you eat that three and a

half percent right up front. And I'm still going to save probably $1,500 to maybe possibly a little more than that over the course of the year I would otherwise take me to pay it off at the old interest rate. But when it kicks back in, it would be 25 percent. It's big. Oh, that's, I think that's nudging into usury issues, but that's not me. What are your goals? What's the best way we can help you today? So, I mean, my goals, I mean, if I could sum it up in one word, it's flexibility, I guess, but it's the way I'm thinking about it right now.

So I'm like, I'm 29. So I've already kind of, I've been thrown it to a 401K, but I've kind of already missed that that boat that everyone talks about of like, you know, invest in your early 20s and let the compound interest do the work for you. And so I know I still have time there. to do that. But within the next year or so, I'm going to have my credit card's going to be gone. And then I'm going to have extra income to do something with.

And I'm wondering what there are obviously a million things I could do with it. So I'm wondering what are the best ways to use that money once it becomes available to me so that I can find the most flexibility. And as Mindy said in the beginning, you know, like detach my time from my money. more and more as time goes on. How much do you currently have in an emergency funder in cash? It's probably a little over a month's worth of expenses. It might be two months if something happened and I really tighten things up.

Probably last me two months. One of the things I like to think about when if your goal, the goal, I think that the goal you have of flexibility is actually an awesome goal. And we should spend just 30 seconds acknowledging that. That that is the goal with finances. I think that most people should have is. building a more and more flexible position. And something to note is that I'm sure you're aware of here is, you know, most of your

wealth is in the 401k there and you have about a month of savings with that along with a lot of debt. That's not a very flexible position. But what can happen within a couple of years, if you do things the right way, you know, is you might buy a house and keep contributing to that 401K, pay off the debts, and you're still no more flexible because you still have one or two months expenses. saved up and you have a higher net worth, but it's not really translating to flexibility in your life.

So I think it's an artful goal to have that in the first place. And then the concept that I would introduce you to is this concept of runway, financial runway, which is the amount of time that you can survive without depending on your paycheck, which right now is one month, I think, of time for you with that. So I think the bad news is that I think that building out financial runway or that that months of reserve is not a good idea until you've paid off the bad debt, the bad debt being your credit card debt right now. Yes, thank you for the plug, Mindy on that. I don't know if you've read Set for Life, which is my book on personal finance, but that's a concept that I try to build throughout the book. in there is this concept of building out financial runway.

What I would kind of advise is, great, crush the credit card debt because if you don't pay that, you're going to assume a 24% interest rate in 15 months. And it'll take you about 12 months at your current run rate, perhaps a little bit less if you find some creative ways, get a raise, get a bonus, or otherwise you're able to cut out a little bit of spending there over the course of the next 12 months. But after that, if you can build out one year of flexible net worth, after-tax brokerage dollars, or a combination maybe of money in a savings account or in an after-tax brokerage account in some form of investments, that's going to give you that flexibility.

And what can happen from there is a large number of options begin to materialize. You don't have to know which option you're going to take at that point in time, but it could be that you decide to house hack at that point in time using your year of savings or six months to a year of savings, your runway. It could be that you decide to take a sales job or something with a commission opportunity that can increase your income. It could be that you decide to just buy a rental property, keep doing what you're doing, buy a rental property, or begin just plowing that into some other form, you know, or just begin piling money bit by bit into your retirement accounts or after tax brokerage accounts. But either way, that

optionality, I think will give you a lot of good choices that you don't have to know exactly what you're going to do with right now, but you just know, you can just know that they will materialize with you. And that at 29 early 30s, you're saying you missed the boat. You're right in the prime of being able to take a large number of shots in your life around starting a business, making a large investment, doing something, changing a career or whatever it is that you want to do. Yeah, that makes a lot of sense. I mean, because that was that was sort of what I started thinking, right? I'm like, I don't want to find myself in a couple of years when I can finally afford a downpayment on a house to then just be sitting in a house and be like, yeah, I have a house,

but now I'm like house poor. And now I still don't have the flexibility that I would want. And so this is the first time I'm now starting to think through like, okay, like I can see the end of the line with this debt. And I can see me having more income freed up to do things with. And now I'm trying to think through what all of those options are and what the path could be, like I said, to just separate the time from the money and make more flexibility. You mentioned the concept of fixed expenses as well. So first of all, I love that, right? If you were to just go in a year from now pay off the debt and then buy a house, you assume a mortgage payment.

I think you said you were paying about $1,000 in rent right now. Your mortgage payment is $1,500. You're essentially in no better of a position from a life flexibility standpoint, even though you now have a house from that. So again, I think the goal of flexibility is such a powerful one with that. The best way to flexibility is paying off that debt, not assume that you know, any more high fixed expenses, right? And understanding that over a moving period, like over five years, let's start with this. How much is left in your car loan?

A dollar amount. It's 13, 13, 5. And how many years is left on that? Oh, four. Four. Okay, great. So in four years, over the next four or five years, you could conceivably get to a position where you've paid off your credit card debt.

You've bought this house, a house hack, right? So your monthly rent is down from $1,000 to $400, you know, or maybe zero, depending on how good of a deal or how advantageous a thing you can find there. Your car loans paid off. And now over the course of that, those four years, you've slowly increased from that $500 month in savings to $1,000 to $1,500 as each of these has fallen off. And it's not an overnight process, and it won't be. There's not a quick path to getting to a million. dollars right now, but that snowball will pick up bit by bit and will increase that monthly amount of savings, which will increase the amount of runway.

As long as those goalposts don't move, then that flexibility will continue to accrue to you in the form of these different types of investments. And those options, like it's impossible to say which path you should take from an investing perspective right now, but those options will begin to appear, I think, as that progress is made. Go ahead, Mindy. I have a lot of comments. First, I think that at your current level of spending, your biggest focus should be on tracking your spending and seeing where you can cut.

I heard you say that you have a compost service. And I don't know if you live near somebody else who also has this compost service. I don't know what this is, like money-wise, but if that's something that you can cut out, yes, Composting is great. Can you dig a hole in the backyard and compost it that way? Or can you connect with a neighbor who has a half-filled compost bin and then you split the cost. I can't resist. That smells like a good opportunity, Mindy. Oh, God. I quit. You're going. It stinks. My compost bin is gross. Anyway, I also heard you say cash withdrawals.

You use a lot of credit cards. And credit cards are this like double-edged sword. On the one hand, it's super convenient to just swipe. And it's also really convenient to track when you have everything on a card. But you have cards, you have like debt. So the cash withdrawals are a lot harder to track. Have you heard of Cube? Q-U-B-E.

No. It is a. cash, a digital cash envelope system. And it's, I'm going to mingle this description, but it's, it's a, it's tied to, it's an app that's tied to a debit card and you have to be conscious of where your money's going by saying, I'm going to put $500 in my grocery envelope, my digital envelope. And then you have to, when you're at the grocery store, say, okay, take the grocery budget and charge it on this card. And then your, your debit card, work. So it's still the trackable spending, but it's not credit card spending because it's coming

out of a debit card. Does that make sense? It makes sense, but does that mean it like locks your debit card until you give it permission to spend the money? Is that how it works? Yes, that's a great way to say it. Yes, your debit card has $0 on it until you, on your app, say, I want to use this bucket to pay for this charge. And if you have $500, you, $500, you have $500, you. in your grocery bill, or in your grocery bucket, but you're trying to charge $600, it won't let it go through, even if you have more money in your bank account because it's coming out of your different buckets or envelopes. So it's a great way to have the convenience and trackability of the credit card without adding more credit card spending. So something to look

into, we call this a research opportunity, Q-U-B-E. I really like this app. And I believe it's free for you to use. Okay. So check into that. I really like this. Funny because like the reason I, like I didn't always have cash withdrawals, but I started doing that for the sole purpose of trying to stop using my credit card. And then that's what ended up happening is I just have this cash in my pocket I'd walk

around with and say, all right, here's my money for the week or here for my money for the month or whatever. And and then it would fritter away on five, 10, 20, here, things here or there, but also groceries. And then you try to look back on it. And it's just this black box. it track. So it's, that makes a lot of sense. Yeah. Yeah, cash is really hard. Yeah, I think Mindy's right to point these out. I mean, this, this area of, we talk about spending, right? The two tips are fixed

and variable, right? So I was just talking about some of the fixed ones, but maybe the house hack or the car loan, those will, those could cut out hundreds or a thousand dollars a month from your fixed overhead over time. You know, that'll take you a few years to fully implement all of all of those. But as long as you don't, but those decisions may have a huge impact. on your long-term savings rate and are automatic. They just put all that money back in. The other part is the immediately actionable stuff. And that's the part where it just comes down to day-to-day management and budgeting with that

and whatever tips or tactics work for you. So in addition to Mindy's great suggestions, one thing that I do is I just have a little habit tracker. I'm a nerd and do these little daily goals almost every single day. And I have a little weekly journal with my habits. And one of them is just personal finance 101. And I've settled on a number of things. like budget or whatever.

But I would write down personal finance 101. Did I do at least like one minute or two minutes of personal finance 101 today? Did I just check my Mint app? Did I just categorize the few expenses I've done in the last couple of days? And if I do that, even if I miss a day or two, I'm really coming back to it just every few days. And I'm like, ugh, I spent, you know, I, today I was supposed to be put me for breakfast. And they cancel on me, very professionally, and a week ahead.

And I forgot to remove the calendar appointments. So I bought myself breakfast alone, sadly. Got you're fired. I'm going to, like, that's going to show up my personal finance 101 tomorrow or whatever when I go and categorize all my expenses. And so that little stuff just helps me eliminate more and more those types of expenses. I think it's really helpful to note that Scott and I are supposedly these like experts and we mess up our money all the time.

So this isn't just you, Kevin. It's not like we're perfect and you're making the mistakes. So we're like, Kevin, why can't you be like us? I am starting to track my spending publicly. If anybody wants to follow along, BiggerPockets.com slash Mindy's budget. And you can watch me right now. I'm doing great. Haven't gone overboard in any expense yet.

But we're recording this on January 4th. So so far, my $4,000 monthly budget, I have already spent $1,700. I'm almost halfway. And of course, that's my mortgage has already hit. because on the first it hits and property taxes and homeowners insurance, but there's also like groceries. I really struggle at my groceries. I'm, and I see you at 850 as a single person, and I'm not here to make you feel bad,

but I put 650 as my family of four budget. And I guessed. I mean, I haven't tracked my spending in the year. I don't have a clue what I'm spending on groceries. but is 850 really what you need? I also see vitamins and supplements that you're taking, and I'm not a doctor. I'm not an expert. Do you really need those?

Are they super expensive? Is there a way to cut the cost? Is there a mail order option that makes it less expensive? And that, again, is another research opportunity for you. But when you have 850 as food, how much of that is groceries that you're, cooking at home and how much of that is restaurants, bars, and beer. I've got a very separate category for beer, and I really enjoy beer. I live in a city that has something like 13 microbreweries. I spend a lot of money on beer, but that's also a really easy category to cut out. So my categories

are, some of them are specific and some of them aren't. And I purposely separated out parties at my house because I have a pool in my backyard. I have people over. We do a lot of like hamburgers on the grill. I just got a pizza oven for Christmas. We're going to do a lot of pizza outside this year. But it's also something that's really easy to cut if my expenses start going crazy. So I think looking at your breakdown, I would go super specific. Like you don't have to do different grocery stores. If you shop at Safeway and Kroger, that can be all lumped into one. But if you go to the grocery store and a restaurant, how frequently are you going to the restaurants? I would separate those out and see if there's like a clear, easy way to cut that isn't going

to change your life. Because when you go bare bones, like you could really get your expenses way down if you cut out absolutely every fun thing in your life. And then your life would suck and you would hate it and you would stop. So where can you make small changes that won't be noticed? in your life. But like every $30 you cut out is $30 more you can throw at your credit card bill and cut it out sooner. And $30 more that you can then throw at your car and cut that out sooner. And it starts to snowball. And I don't know if you are, if you like this, but like I start

seeing, you know, ooh, I wonder how little I can spend this month when I'm tracking my spending when I really, Scott called himself a nerd. I'm a nerd too. You're surrounded. Sorry. but like it starts to be a game. How little can I spend this month? Oh, it's the 27th of the month. Can I go for the rest of the month without spending any money? Well, the car's on E and I have to go to work tomorrow, so no, I can't. But, you know, I can find something in the cabinet so I don't have to make,

so I don't have to go to the grocery store and buy more food. Like there's, it just, if you can turn it into a game, it's a little more fun. And here's, you know, this is, when Mindy says fun, right, I'm not going to, I'm not going to say. Use the word fun to describe this. This is, if you're like me, this is not going to be a fun activity for you. I think the way I approach it is, like, let's just think rationally and practically and calculatingly about the math behind our financial position with this. There are four levers. Spend less, earn more, create or invest.

Right. And right now, the lever that is most controllable for you is spend less. That would be the case for probably one to two, maybe three years before. other, before that flexibility kicks in and the investing or creating or earning more, um, uh, category is really open up in a really meaningful way, um, perhaps to a, um, uh, they, they may be open to you currently, but they may be much more open to you as your financial position becomes more flexible and you build out that financial runway. So the deal is right now, you're giving a lot of power to your boss, um, right now in your life, right? Because you have, you don't have that financial flexibility.

So and the way to buy that back, the, the, the, the, the, the, the, the, the spending component of your finances is a very powerful lever in the, to the concept of flexibility, right? Because the less you spend, the more you accumulate, and the less runway you need in order to sustain your future spending. So if you can cut your spending from three grand a month to two thousand a month, you're saving an extra thousand bucks. and instead of needing six grand for three months of, I'm sorry, if you spend three grand, you need $9,000 in the bank to give you three months of flexibility versus $6,000. That will give you three times $2,000 in monthly spending. I'm butchering that. But the concept there, that's a really powerful concept.

And then you have to understand, like this is not a permanent state of affairs, but it is a grind for a period of time to keep those expenses as low as. as possible while you build up flexibility, perhaps passive income, more scalable streams of income, alternative sources of those types of things. And then it can begin picking back up on the other side of that over the duration of a lifetime. And it's that period of, I think, self-sacrifice that puts in a position to build that flexibility and then ride it from there on. So my spending is not as in-controlled as Mindy's.

And I have some work to do before I would post it publicly on. this, but it's not the biggest, it's not the lever that matters right now in my personal financial position. But when I was starting out from scratch and starting to build up my position, I was around that $2,500 a month in spending over that period of time while I was building up that flexibility on a $50,000 a year income, because that was the biggest lever for a period of four, five, six years before it began to transition into managing my assets and, and expanding my career here at bigger pockets with that. So that's that's one way to think about it is whether it's fun or not, it's the it's mathematically where the time should be spent and it's work

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So I have a thought. So you're a marketing communications person. And I don't know if you know this, but there's this thing called the internet. And there's a lot of things going on on the internet where people need marketing and communications. I would first look at your employment document. to make sure you don't have any sort of non-compete or you can't do any work for anybody else while you're there. But if you can start your own marketing and communications company now, because if it

completely fails, what have you lost? Nothing but like $8 on a website name. And if you paid more than that, you paid too much. But like it can be a really easy way. Like, it's not easy for me, but I'm not in marketing and communication. So that's okay. But there's also. sorts of things that you can do for clients that are automated or easy or like low time out of your day or even like big up front time and then it continues on. But having your own business and starting your own business while you have a source of income so you can try things. And if they fail, that's okay. I think now it is a great time to start in the marketing. Especially now because all everybody's budget is just opened up again. In December, it's

really difficult to get a dollar from anybody. But in January, who-hoo, they're spending money everywhere. So start out there. What is your area of expertise? What is your industry of expertise? What is your genre? And go from there. What can you provide people? And how can you do it in such a way that they send you a lot of money every month? Yeah. That all makes a lot of sense. And I think I'm a little bit more in the Scott camp here where it's not super fun for me to be tracking all this stuff. But I think the thing that's really changed has been like I've just, I guess a part of what I've said earlier about my goal for flexibility. It's also like the goal to not have to think about money all that much if I don't if I don't have to. And the mindset shift that's just

happening for me very recently is like I need to think about it a lot more right now so that later on I don't have to think about it as much. And I think the, and the fact that I haven't been thinking about it that much all these years has actually been driving me further and further into a position where now I need to think about it way more than I want to. Yeah. Like Mr. Money Mustash has, I think, a really good framework for thinking about money in one of his blog posts. And that's a great blog for you to check out if you haven't already. That extreme mentality, I would say he's fairly extreme. I think most people would agree with me. on the savings front.

But, you know, that really was a big motivator for me. It was his blog and kind of embracing a lot of the concepts that he talked about. And that might be a good entry point for you to just start perusing a couple of random articles. And it was one of those, he talks about, hey, a healthy relationship with money may ultimately look like your relationship with tap water. And I've used this before on the product past. But let me go roll with me for one second here. Like tap water, you turn on the faucet, you take what you need, you use it, you shower,

whatever, and then you turn it off. You don't waste it. You have complete control over where it's all going, but you don't really think about it on a day-to-day basis. It's not something that's there. That's the ultimate goal, I think, in finance with that. But right now, what your story is telling us is that money is leaking through all these different holes or has been for a while in your ship. And you need to plug all of those before you can really begin to turbocharge the income creation. And you're well on your way. You've clearly done most of the work. You just have, a little bit more left to kind of clean up, particularly around the day-to-day side of money management. And yeah, it doesn't have to be all-consuming, but it should be every single day or close to it

that you're tracking and managing those expenses. Go ahead, Mindy. I have one more thing that may be a bit controversial. So I'm going to post this in the Facebook group. And I'm really going to do it, JT. I'm not going to just say I'm going to do it. And then I'm actually going to put a calendar notification. My friend JT listens, he's like, you always say you're going to do it.

then you forget. Well, yeah, I do. So you have a $30 charitable giving line item in your current budget, but you also have $7,000 in debt at what will be 24% interest rate. So at what point do you stop your charitable giving to focus on paying down your debt? And $30 is not just going to magically wipe out your credit card debt. And it's not going to wipe out your credit card debt. And it's not going to wipe your student loan. And that is a nominal fee. But if it was $1,000, that would be a really easy place to tell you to maybe pull back a little bit. So I'm going to ask people in the Facebook group, where do you start and stop giving? And this is charitable giving. This isn't like a tithe to a church. Is that correct? No, no, it's not. It's just a monthly donation to a group that I like

the work they do. Yeah. So, and that, like at 30 bucks, I just used the term $30. every $30 is more $30 you can throw it down down your credit card. But this is like doing good work. So where is the balance? But is that the only charitable giving you're doing? Could you use that money to pay down your debt and then just throw a big bunch of money back at them now that you're not making your $250 minimum credit card payment? Like I'm not encouraging not being charitable, but also like you have to look out for yourself. I'm just tripping all over this.

Scott, help me. You don't have tried to say. I mean, I think what I'm hearing is you're trying to look, you're trying to tell me to look everywhere. Look everywhere where all of your money's going. Look every single thing. And where could you cut something and where, where do you not want to cut things? And I, my immediate reaction to that is like, yeah, if it was a bigger number, I would look at it harder. But I think there are, I know there are other places I can cut a lot more.

And cutting that first would make me feel a little weird inside. Yeah. Well, exactly. I'll tell you another place to look. So I'll see Mindy's controversy and upper, and upper erase her with this. Go to the 401K. Take the match on that. But why are you investing in the 401K when you have credit card debt that's going to be incurring a 24% interest rate with that?

Right. And personally, personally, I didn't. And I probably, if I'm in your shoes, you know, if the money's going to hit my bank account, I'm going to waste it. put it in the 401k for sure that's that's a that's a tax advantage place to do it but if you're going to intentionally manage every dollar flowing through your position and direct it towards the goal of flexibility the 401k is not going to provide that so i i i didn't and if i was doing it again wouldn't contribute to the 401k in the pursuit of building up that first year of financial runway because for me i would intend to use that runway to jumpstart that next phase of my career by a

house hack or do something else that's going to have a way bigger impact on my flexibility early in life than the 401k. Yeah. I thought about that. I thought about that. I've been thinking about that, too. Like, I'm contributing twice what my employer matches right now. And that was some of the feedback I heard from some of the people in the group in the Facebook

group, too. Why don't you take that other 5% and put it in a Roth IRA and then you might be able to use that down the line as part of a down payment? And I don't know exactly how that would work. or if that even makes sense or if I could just keep it as cash and that, you know, like if the house tax is going to happen in the next, say, five years, does it even make sense to put it through into like an index fund through a Roth IRA or just to keep it as cash if I'm going to take it back out that soon?

You know, that's another question. That's a weeds question, but it's another thing I've thought about. I just wouldn't be maxing out a Roth IRA when you have credit card debt. So it's all about arbitrage. So let's see, like there's some way to mathematically compute this that I can't do in my head here. But you have 15 months and then the credit card rate is going to go to 24%. So, you know, you're at 0% for now, but like you have to play either a timing game to do that or, and you're going to take market risk. So if you put, if you max out your Roth IRA and put

$6,500 in there, instead of paying off the credit card debt, you might, if things go really nicely, be able to pay off the credit card debt before that hits and have a year in the market. Big whoop, you're going to get 10% on that Roth IRA return this year and have that sitting in there. You know, I just don't think that that's, I think that that's, it may be a game worth playing, but to me it seems like a much simpler and clear order of operations is, no, no, cut all spending that I can, that's reasonable, tovert every dollar to where I want it to go. It doesn't mean don't have any fun. You clearly have enough savings to have, you know, the fun you want to have with this,

but make sure I've got control of every dollar that's going out, going out. I'm diverting all of my cash. I'm taking my employer match because that's 100% return. That's going to dwarf your 24% interest rate on the credit card debt. But then after that, everything's going toward the credit card debt. Then I'm building out my financial runway to the point that I'm comfortable with. And then I'm using that to go and pursue some sort of opportunity. That's going to have a really powerful impact on your situation if you think you're actually going to use that flexibility

to some sort of financial advantage, like a house hack or changing careers or starting some sort of side hustle that requires capital or making another large investment. If you don't think you're going to use the financial runway, then start maxing out the Roth IRA or the 401K instead of building out the flexibility. Yeah. I mean, I think if I guess my question was like, so even if I didn't touch my 401K contribution right now, right now at the rate I'm paying credit card. debt down, it will be gone well before this promo period is over. So if I was to then take

that additional 5% that I'm putting in a 401k and stop doing that, should that just be stacking in a savings account for that runway you're talking about? Is that like? I think it's whatever flexibility means to you. So that's the big question. Like, where should I store my runway? Right. So like a lot of people put that in like, okay, I want a savings account. That gives me flexibility. Some people are like, I'll put it in an after-tax brokerage account because I can spend that whenever I feel like it. And some people put it in money. Like, it can be a spectrum. It's whatever you're comfortable with.

When I was getting started, I put it all into an index fund in my after-tax brokerage account. I'm not sure that was a good idea. But that worked out in 2013 for me at that point in time. And I really wanted to get started investing. And I was like, okay, I'll just build double the amount of flexibility that I needed that I need in that brokerage account over time. And that's flexibility to me. And then I pulled out some of that to buy my first house act. I learned later I could have used money in a Roth IRA that I had contributed

and pulled out, I think, up to $10,000 to be the down payment. So that's a good option, but it adds some complexity into the situation. And there's less uses of the, like that would not be, I think it would be harder to pull that out to start a business from scratch, for example. Or at least the gains would be hard. pull out to start the business. So there's differences in what you think flexibility means. The obvious answer is a savings account, but then you better use it if it's going to be in the saving. You better take some sort of advantage of it if it's going to be if you're going to build that much of a runway in a savings account and use that flexibility to your advantage because you're

just going to be destroying purchasing power to inflation. If you leave it there too long. But that makes sense too because I didn't, that piece you just said that I pulled out I wasn't thinking through was the amount you can take out of a Roth for something like a down payment on the house is only the contributions. It's not the gains that you might see in the next five years. So that... You can actually pull out $10,000, I think, of the gains to be used as part of your house down payment. So you can pull out the contributions any time, but the gains, there's a set of exceptions up to certain limits that you can use them for.

So it's reasonably flexible, but it's not quite as flexible as other... Or just like a brokerage account. Yeah, yeah. So, but yeah, I think that's the way. But so, so let's pull out the next. So, so you're saying, should I stop contributing to the 401K? Like, the question is, should I stop contributing to the 401K and the Roth and pay off the credit card debt? Well, if you think you're going to pay off the credit card debt really fast, it doesn't really matter.

Like, let's say you pay it down by the end of this year, then you can divert everything back to the 401k and still max it out next year or to the Roth and still max out as much as you can next year with that. But I think that a simple all-out step-by-step approach might make a lot of sense rather than kind of piecemealing it here if the goal is flexibility over the next 12 to 24 months. Yeah, I think that's what I'm trying to think through. It makes a lot of sense. I'm trying to think I could do all of these things at the same time. Or if I do them one at a time, what is the order in which I do them? And that's helpful. Yeah.

To me, that order says, screams credit card, financial runway, then maxing out probably the Roth rather than the 401K in your situation. And then the 401K. Yeah, but here's the thing. Like, at your income and your savings rate, you're not going to be able to get through that whole list inside of the next year or two. But that can be a goal. Also, he's going to start Kevin's really awesome marketing and communications company. dot com and then uh become a patrillionaire is that domain taken yeah i don't know i didn't look it up but yeah probably not better take it before those airs yeah yeah so if you need kevin

and his really awesome marketing and communications company just go to that dot com okay so i'm going to invite you to listen to episode 75 with justin from the saving sherpa in regards to cutting your food budget because Justin is a master at cutting your food budget. What does he spend like a dollar 50 a month on his grocery, Scott? It's something really ridiculous and still doable because he shops he shops the sales. It's been, God, it's been almost 200. I think he spends more than a dollar 50. It's probably more than a dollar 50, but it's not much. It's like 35 or 50 dollars a month or something. And of course he's not eating filet mignon every night. He's not eating steak and, you know, He doesn't have a lot of meals with meat in them.

But when there is meat on sale, he will buy it in bulk and put it in the freezer so that he can have meals with meat down the road. But he grew up without a lot of money. And his mother would play a game with him. What's the lowest price you can find at the grocery store? What's the cheapest meal we can make? So they ate a lot of creative meals. But beans go a really long way as a source of protein. And if you can cut the meat out of a meal like once or twice a week, that is a huge gain in your grocery budget.

I would look at what is your groceries, like what kind of groceries are you buying and how are you shopping? Oh, in episode three with what was her name, Aaron Chase from $5 dinners. She has a plan where you can make dinners for $5. And Scott, she was, sorry, I'm remembering this show. And this is right when we first started. And she's talking about shopping the sales. And Scott's like, I've got to change my whole way of grocery shopping. Yeah, that's insane to me.

Like, I mean, $5 dinner is one thing. But yeah, like I've heard some of, I've been listening to the show for a while. And I've heard some of these episodes of like families of five feeding themselves on like $400 a month. And I'm like, how the hell do you do? there. Yeah, it can be really, really tough. I don't know how some of these people do it. I bet it helps. I bet it helps because sometimes like if you live far away, like in a pretty rural or remote area, you've got a buy in bulk and plan it all out for the month or whatever. So I bet that also helps and may skew some of that because like Mindy, I think does a pretty good job. Isn't that 650? And I'm probably at like 650 or 700 at groceries for the tool of me of my wife. So I'm not I'm not so great at the, at, at at this one. I probably need to go back and listen to that. That's just funny. Like I make sense though.

Because I mean, I just, the house I live in now, I just moved into a few months ago. And before that, I was living in the city in Boston. And just by moving like 20 minutes out into the suburbs where now the closest things to me are grocery stores instead of like the million takeout joints that are around on my block in Boston, I immediately started spending less. I was spending even more before. I still have a ton of room to cut. But like, just that I knew that was going to happen.

to just the act of moving out here where now it's like the two or three closest food places are grocery stores and not the 12 takeout joints I pass on my way home from work immediately made it easier. But that was a passive thing. And now I'm at the phase of like now it's now it's time to get into the active phase basically. My 650, I need to qualify that with, again, we're recording this on January 4th. So far, I'm doing great, but it's only four days in. My 650 is a guess. I really hope to come in under a thousand. I mean, it'd be really nice to come under 650, but I really think I'm going to blow that out of the water

and need to really figure out how to fix my grocery budget. But also, Scott said the P word, plan. When you go to the grocery store, do you have a list? Or do you just kind of grab what looks nice? I have a list, but I also grab a few things that look nice sometimes. Ooh. So here's an idea. Spend money to save money.

have you tried the grocery shopping apps where they shop for you? Because if you give them a list of things, they only give you that stuff. They don't think, oh, maybe you would like these bananas and this milkshake and these granola bars that I thought looked good. They only give you what's on that stuff or like a reasonable substitute. So that could be something interesting to try when you're trying to cut your budget. Oh, I need 17 things. Only buy 17 things. And if you can't, maybe have somebody else do it for you so that you don't buy other things.

Also, don't go to the grocery store hungry. Yeah, that sounds a mistake. One of my things is I, by the way, my wife will make fun of you because I don't really go to the grocery store quite as much anymore. So thank you, Virginia. But like what I was doing this, like, I would just make the same thing every week. And I learned from Aaron Chase that it's a mistake because like if you're a mistake. Because if you're a more masterful cook than I was with three or four recipes that I could make, she can say, okay, I'm going to actually modify my whole plan on the fly based on what is on sale.

And I can see that through the apps or whatever that the stores have and all that kind of stuff. So that's probably another tip that is better than I ever did. But that might be helpful. Yeah, I make a lot of the same things despite whether it's on sale or not. Yeah. Oh, I see a way to cut. But yeah, like having a plan, and you don't have to have a whole actual, like, I stick to this plan specifically. But if you have a week's worth of groceries or a week's worth of meals planned out and you say to yourself, oh, I thought I had chicken breast and I don't.

But I do have pork chops. And that was what I was supposed to make tomorrow. You don't have to go and buy that stuff because you know in advance, oh, I've already got this for the next meal. So then you can go get chicken later. Because when you go to the grocery store, like you just said, I also did the same thing. You go with the list, but you come home with extras. All the things that you're saying you do, I do too. I'm just sitting here like, oh, this is what you should do.

Is that what I do? But again, it comes down to it's all about the lever in your financial position. And like, this is the one that is immediately actionable to you in the next couple of months that will save you several hundred dollars with this. Is it going to get you to a million? dollars in net worth, no way. But it will get you the start, begin building you the flexibility, and then you need to leverage that flexibility within the next two years to make a big investment and or start a business or, you know, take an income opportunity or whatever. And that's what,

that's what this power, that's what this, the power of this activity right now is, is in setting that, accelerating that the time when, when those opportunities are going to be more accessible to you. Yeah, like I said, I think it makes that all this stuff makes sense. All this stuff conceptually makes a whole lot of sense. It's really, I think, has always, this whole thing is coming down to mindset for me. And it's coming down to this, the way that I think about money. Like, it's always sort of looked like something that was in the way or that was a burden or that was something I didn't want to think about.

And now I'm seeing it as an opportunity. And that's really what's helping me make it easier to make these decisions. help it easier for me to like get excited about making these kinds of plans because I see that it's an opportunity and it's not just like something that I have to do and that money's in the way and I'm like, oh, I don't want to do this or that. I'm like, no, if I do this or that, I get to do this because then I'll get to do X, Y, and Z down the line. And that's been, that mindset shift has been like a game changer for me. Yeah. It's power. Power over your, like over your life and every aspect of it with that, that will accrue over time.

with that. And I think, so this, this process that we talked about, this should be, I think this should be a Q1 goal for you. I'm going to, I'm going to master this and knock this out so that in Q2, maybe my strategy fundamentally doesn't change with where the dollars go, but I've got such a lock on my spending that I feel like, you know what, maybe there's more I can do, but it's really just not a lever anymore. I'm not going to go after 30 bucks in my giving budget at this point. With that, I, I'm good there. Now it's about income generation or my, investment approach that I'm going to be that I'm working towards how do I read a bunch of books to get become a master of real estate investing or this other this other thing but like just knock this one out

as as a lever get control over it so that it's not so that it's not it's not a variable in your equation you can focus on the the the more fun ones of of earning more investing which I think I sense that you want to get to yeah oh yeah I definitely want to get there and that's why that's why I'm here talking to you all right now is like I feel like I can finally see beyond the phase that I'm in right now and I'm starting to think about what the next thing is and getting a lock on the spending now which is basically part of that's going to free up my time

and I'm like all right, just my time in every day of what I might spend doing like hobbies and things. Now that I'm excited about this and what I can do next, I'm like, well, what do I want to learn about next? That's going to be one of those options I can then actually take when I have the money to invest in it, whether it's real estate or whatever it is. That one I'm definitely thinking a lot about,

is like how do I spend that like I think it was a recent episode I was listening to you both where you say are you willing to spend like 500 hours learning about something to really get good at it and I was like wow you know that's I could probably spend 500 hours in the next year or in the next year while I'm paying down this debt so that when it's gone I've learned a lot and I can just like be ready to take the next step you know I think that's perfect I also think you know if you're looking to get more aggressive that we've described here so we talked about hey cut expenses, you really have that one category of variable expenses right now with that. The other ones are going to be the bigger fixed ones.

Like when you move next time, can you cut that rent even more with some sort of creative strategy? I don't know. Airbnb somebody's property, I don't know, whatever, like maybe there's a way to do that, the house hack of the interim or something like that. But it's really about those variable expenses in the short run and then making, having a plan for when the expiration date hits on your car payment and your housing payment and whatever so that you don't reassume those and you can knock them out and you're spending permanently decreases by that level.

Ideally for the rest of your life because the next time you buy a car, hopefully it's in cash, you know, when you have the finished position to do so. So then I think it's like, what are you going to do with the excess cash? Well, you put it into some sort of logical order. My preference personally, if the goal remains flexibility, and that's actually the primary goal, would be to do an order of operations. Take the match because that's 100% if it's 100% match, it's 100% gain on day one.

But funnel essentially every other dollar towards the highest and best next use, pay off the credit card, build out the emergency reserve or whatever you consider to be financial runway. That's something you'll have to internalize about your own risk tolerance there where you want to plop that money. And then, you know, I think in the meantime, once you've locked that down on the spending side and figured that out, you now know, great, I'm saving 500 bucks a month, maybe $6.50, $700, depending on how much control I can get over those variable expenses.

It's going to take me this long to pay off my credit card debt. What can I do in the meantime if I'm motivated to do more in my free time and it's not going to distract from my quality of life? Can I, you know, so what I tried to do is I tried to start various businesses. every 90 days that required little to no capital or like some sort of side hustle. And most of them failed for the first two and a half years. I tried to start a company that sold winter gloves for driving. I brought a mastermind, a proposal to my mastermind group that I had joined about winter tire rentals, the theme there.

And that was a terrible idea because if you buy the winter tire, if you buy like a set of tires and you rent it out for a year, I pay 400 bucks for the tires. I make 250. but then the next year they may not rent and I just have a pile of inventory that is only going to last me three years and I've got to buy more tires for all like all the cars just have renting tires doesn't they don't be they're not rentable for very long yeah so they're talking about that way but I tried those every and like most of them were terrible ideas but then you know over time things started hitting my house hack was one of the things that I did which I considered to be one of those things I wrote the book um uh in three And so a number of those began to, over time, become, you know, valuable contributions. I learned from each of those. So that could be a framework to deploy as like every 90 days.

I'm going to start something that has some potential to either help me learn but won't cause me a lot of grief and losing my money. And those opportunities will get better and better as your flexibility improves. So that would be another thing to think about once you've locked down your spending, focusing on that second lever of these opportunities. I want to point out that all of your failed endeavors involved, not all of them, but most of them involved holding physical inventory, which is something that you have to put money into in advance and hope that somebody comes and buys it. Whereas Kevin's super-duper amazing marketing and communications company.com is $8 for the website or nine or whatever. And then Kevin, assuming, I'm assuming, that Kevin can put together the website or know somebody who can.

And then it's just his time. So if it is a big flop, he's spent eight bucks or nine bucks. And he already has a computer. He already has the capacity to do it. He already has like the ideas. It's just your mental space, which is free. And I don't mean that in a bad way, although it sounds bad. Like you're not paying for that.

So if it doesn't work out, you're not out a huge amount. And Alan Donigan was on episode like 17 or 18, and he has this thing called pop-up business school where he teaches people how to do a super lean startup. Don't go out and buy all the things and then test the idea. Test the idea first. So I love Scott. I love that your mastermind people told you don't rent winter tires because I don't love that idea. I love the creativity behind it.

But even Kevin's superduper marketing company.com will be able to get you a lot of business there. Or maybe it would. Oh, maybe that's a really great success story. Kevin SuperDuper Marketing. We're so good. We can even sell Scott's rentable snow tires. But anyway, I just want to point that out.

One day I'll prove them wrong. Yeah, if you ever revive the idea, call me. We'll set up the website. That's great. What was it? Kevin Superduber Marketing.com? Superduper Marketing and Communications. Yes, marketing and communications.

dot com. Yeah. Dot org. Or if you can't remember that, email, Mindy at BiggerPockets.com, and I can connect you to Kevin. I think I'll remember super duper marketing and communications. com for the rest of my life. But, but, so hopefully this is getting at least some ideas sparking.

The strategy in the short run with what your cash is going to be going to be doing is pretty clear cut, I think, for me, for the, for the most part with that. Depends on how much, how far you want to go with reallocating the capital or accumulating, perhaps away from the 401k to the debt. or not. But it's probably credit card until it's paid off and then into that flexibility. And then if you can, knocking it out and saying, can I set myself up to try some of these ideas, whatever ones look good to do at the time? And if you can go and look back and say, hey, in two and a half years, I'm going to look back where am I at? Well, I've paid off my credit

card debt. I've built out a year of runway. So I have the FU money, if I ever need it, for my job. I'm using that to my advantage somehow. And I've tried 10 businesses. or scaled one 10 times, you know, over 10 quarters to get to something, surely some good outcome in excess of what the math, the formulaic math would tell you is going to happen, what happened over that two and a half year period, that would put you ahead of, you know, just saving 500 bucks a month times 30 months, right?

So. Yeah, that makes it more sense. What do you have thought? Is this answering your question? Yeah, it is. It is. Yeah, it absolutely is. It's real, like I said, I keep coming back to the mindset thing. I keep coming back to the framework of should I be trying to spread things across multiple or should I just focus down and do things one at a time? And that makes a lot of sense. And the thing you just said about the formulaic math versus the sort of unseen opportunities or the sort of compounding effect of what you can do with flexibility. That's like, motivating. That's motivating to me. Awesome. And there's no, there's no, you can't diversify right now. This is not a good time

to diversify, right? Like, diversification is great of all for diversification, but you have to diversify when you have assets to diversify. So I love the idea of just going all in on, on the, the thing that you think is best for a year or two. And then you can diversify when you have hundreds of thousands of dollars in assets into two point, uh, to, to begin diversifying with that. That's, that's a, that's a point where I think it makes more sense to begin with those types. of things. Otherwise, you're just going to ensure that you have a small pile that doesn't lose money versus, you know, using that flexibility to go after a big opportunity. Right. Okay. Well, sounds like I need to talk to you in two and a half years when I have my

Superduper Marketing Communications.com. 90 days. Oh, yeah, the website will be in 90 days. Yeah. Okay. Okay. I'll call you and we'll spin up that tires idea. Sounds great. Oh, did you hear that Scott? We'll spin up that tires idea. He's just like you. Yeah. I like that. Kevin. Yeah. He's like, I'm not sure I give myself credit for that one. Okay, Kevin, when you have your website up and running, let me know. And I will make the announcement in the Facebook group. Hey, remember Kevin from episode 270?

Well, now Kevin's marketing, super-duper marketing and communications.com is up and running. So I will give you a plug in. Oh, it's rolling. Yes. His first client is Scott, so he's lost money on Scott's stupid idea. So he needs more clients. So call him up. And then, because self-promotion is not.

allowed in the Facebook group, but it's my group so the rules don't apply to me and I can post anything I want. So I will post that for you. So let me know. So hurry up. We'll do. I got nine bucks. Okay, Kevin.

So I got nine bucks. What? You got nine bucks. There you go. Okay, Kevin, this has been so much fun. I'm super excited for you. You've got a slog ahead of you, but I, just by talking to you today, I know you are going to crush it.

And when we check back in on you in two and a half years, you have to reach out to me. remind me that you have crushed life and you want to come back and share it with everybody. Everybody else will know, too, that you have absolutely crushed it and you are well on your way to becoming a millionaire by age 40 simply because you are doing what is different. You're not swiping your card, getting inclined and saying, well, I guess that's just part of my life. You are taking action to make changes and that's how it works. So thank you so much for your time today and we will talk to you soon. All right. Thank you both. Okay, that was Kevin. That was his fantastic story.

And that, again, you can find him at Kevin's Superduper Marketing and Communications Company.com. Maybe. He'll probably shorten that because that's kind of a mouthful. Scott, what did you think of his story? I thought it was great. I don't think he'll probably be filing for trademark for that particular corporate name in spite of your great suggestion, Mindy. But I think that I think it was a good episode. One of the observations there is, you know, and I have to imagine this is frustrating to Kevin

and perhaps a lot of people in his situation that are kind of just getting started. started is we talk about the four levers and there's so many different ways to think through, hey, if someone comes on our show and they have, you know, five properties and some syndication investments and a 401k, these other assets and, you know, two different three or three different sources of income and, you know, a variety of different expense buckets that look like they're a little over, you know, now we can kind of, we can go through and we have a complicated discussion about which area to focus on and which is the biggest lever in that situation that depends on their net worth, their income sources, they're spending, if they have a business

or any income that they can control, how we can think about those. And when it comes to Kevin's situation and folks are just getting started on this journey or have debt and are in the whole, we really have to keep that focus on that first lever of spending less and getting complete control over every dollar is going. say that the strategy here is understanding that it's a grind to get through that and control that and sustain it for years, really, to pay off that debt and build that financial position. And then the game begins to open up a little bit more when that flexibility is built and there's investment opportunities or income opportunities with that.

But really, that's the most powerful lever when someone's just getting started and get control with every dollar, knock it out and know that I'm going to have to sit on that. self-educate and prepare myself for that opportunity that's going to come a year or two years down the road as I build out that stronger and stronger financial position to make that first house hack investment or that first serious business opportunity or that career change or whatever to scale my income and begin plying those other levers in the journey. But in the meantime, it really is there's one major lever that makes the big difference and it's that control of that spending because that's the one that is within your control and ability to change in the short run.

I was struck by the parallels between our advice for him at the start of his journey and our advice for people who are in the middle of their journey and doing well and just waiting for their wealth to grow. It's a slog. And right now he's paying down his debt before he can start waiting for his wealth to grow. But it's a slog to pay it down. and you have to just kind of keep going and keep doing what you're doing. And, you know, it's proven that this will work. But it's, you know, just like the higher net worth individuals that we talk to who are, you know, I have $200,000 in net worth and I want to retire with a million or $2 million.

Well, keep doing what you're doing. You're doing great. Keep going. Well, well, I actually, I'll point, I'll call that out. I think that is an important takeaway. And I have a slightly different twist on that now that you said that with that. I think his situation parallels to an extraordinary degree a household that might have two or three hundred thousand dollars in 401k assets and $200,000 in home equity in a net worth in the $400,000 to $500,000 range, but still only has one to three months of emergency reserve. They may have a cleaner financial position, but they're really not any closer to flexibility than Kevin is.

in terms of his journey with that, right? I think that's a powerful takeaway for me from this, is if he can build that out and build that flexibility, so it's outside of those retirement accounts and outside of that home equity as the primary drivers of his financial position, he may be able to get into a flexible financial position that is capable of supporting him for several years

or at least a year within two and a half years and sustaining that for life. So I think that's an important takeaway of where you build your wealth can have a huge impact on, your flexibility, if that is, in fact, one of your goals from finance, which I think it should be. I think that's really key, Scott. Where you build your wealth is a huge impact on, has a huge impact on where your flexibility is. Because, yeah, I'm a big proponent of the 401K. I like the 401K for the multiple benefits. It reduces your taxable income. It gives you a way to invest

for your future. But you also, especially if you're planning on retiring early, you need to invest for the years between the time you retire and the time that you can take your 401k without penalty. Because you'll always pay taxes on your 401K, but why pay a 10% penalty if you don't have to? And personally, I'm a little cocky or arrogant perhaps with that. But like I thought and think that if I was repeating it, repeating my journey, that money that was in my bank account or accessible to me was going to do me far more advantage. I would find a way to use that to pursue an opportunity in excess of what was in the 401K.

Not that I was a, not that I'm averse to the 401K or the Roth or retirement accounts in general. I do contribute to them, especially today with that. But in the first four or five years of building wealth, I really didn't contribute that much to my retirement accounts. And I instead plot all those dollars into my savings account essentially and buying rental property or investing after tax in, index funds that I would have that flexibility. And to me, I thought that that gave me a great advantage in my life in seizing opportunities or going after investments that I wanted to, that I couldn't have done if I had tried to max out those tax advantaged accounts in the early years. I don't know what the right answer there is. I think it's an art. But I think that there

is a, that flexibility needs to be considered and is a worthwhile debate. Another person who did that was Craig Curlup in episode 35. He had $80,000 of student loan debt and chose to pay the minimums on those and aggressively pursue rental properties and renting as property out on Airbnb and living behind a curtain and sleeping on the couch so he could rent out his bedroom. And really aggressive, I think that's like the best word to describe his journey is he aggressively pursued doing. different ways to generate income so that he could pay off his student loan debts without having to sacrifice from his job. You know, one thing that I'm really interested in is I think that there's a lot of baby boomer businesses, like services businesses, HVAC, plumbing, janitorial, carpet

cleaning. And you go in like, I go in like Colorado by Bezell. sometimes and look at these businesses, and they're selling for one-time's cash flow. So that'd be like a rental property selling for $300,000 that produced $300,000 in cash flow next year with that. You can buy these businesses with $50,000 or $60,000 or $70,000 down with a small business loan and perhaps seller financing because there's nobody buying these businesses. There's nobody that's in those markets with that.

And I think that if I was starting over again right now and trying to do that, I would buy the house hack with my financial runway. But I would be thinking about, is there an opportunity in some sort of business like that that's earning the $300,000 a year range? That's got an owner that wants to sell. Is there a way to put myself in position for that? I don't know why I'm thinking of that. But that's something that I would be interested in, I think, right now if I was starting

over. Sounds like we're going to have a conversation as soon as I hit stop recording, Scott. Yeah. If anyone is doing that, if anyone owns a business like that or has bought a business, business like that or interested in exploring that, please reach out to me at Scott at BiggerPockets.com. I'd love to hear from you, and maybe that would be a good Bigger Pockets Money podcast show. We've also had a number of shows on that on the Bigger Pockets Business Podcast. If you want to go back and listen to any of the archived episodes on that, especially the one with

Nigel. I'll find that one in a moment here. Nigel with the hard last name. Yes, Nigel. I'm not going to try to pronounce it right now. No, no, try to pronounce it. That'll be fun. Nigel Guisinger, Guisinger. Gisinger. Gysinger. Gysinger. Gysinger.

All right, Nigel. But that Bigger Pockets Business episode 51 talks about this concept a lot. And I really enjoyed that episode. So go back and listen to that one if you're interested in this. And if you have bought a business or operated business of the type that I just described, I'd love to hear from you. I'll hear about your experience and maybe bring on the Bigger Pockets Money podcast here. Yes, yes, that'll be a lot of fun. Okay, this episode wraps up our January, 2022 month and Finance Friday episodes. We are always looking for more Finance Friday guests. So if you would like to join us and have us go through your finances, please reach out or please apply at biggerpockets.com slash finance review. And if you're not part of our Facebook group, go join. We have a lot of fun talking about money and nerd stuff. So Facebook.com slash groups. slash BP money. Okay, Scott, should we get out of here? Let's do it. From episode 270 of the

Bigger Pockets Money podcast, he is Scott Trench and I am Mindy Jensen saying, may the raisins in your cookies always turn out to be chocolate chips instead.