BiggerPockets Money Podcast - 298: The April Stock Market Slump | Mindy & Carl’s Budget Review

Episode Date: May 6, 2022

Stock market crashes aren’t common, but when they happen, they often catch you by surprise. Thankfully, we’re not in the middle of a stock market crash, but this current correction or “dip” we’re riding has got some early retirement and FIRE chasers feeling a little anxious. Carl and Mindy Jensen, real estate and index fund investors, have seen a twenty-five percent drop in their portfolio just over the past six months alone. What effect does that have on their future financial plans? Welcome back to this month’s episode of Carl and Mindy’s Spending Summary, where we finally get to see an under budget month! Thanks to some family frugality, Carl and Mindy were able to shop pretty light this April, even while going over budget on some essentials like groceries and medical expenses. This may be the last under budget month for a bit as some upcoming trips may prop up their expenses as we roll into summer. Carl and Mindy have also been keeping an eye on the stock market and how its performance is affecting their portfolio and future retirement plans. When Carl decided to step away from work five years ago, he had the tailwinds of a strong stock market at his back. But, with recent drops in stock valuation, it begs the question: would Carl still be able to retire early if the market conditions mirrored today? In This Episode We Cover The budgeting and expense tracking “slog” that helps you spend less and keep more  Expensive summer trips and how to account for future travel in your monthly budget The Nasdaq’s rough month and what to do when stock indexes start to fall The 4% rule and how rough market conditions could hurt your early retirement plans Whether or not you should still retire during a market crash/correction  And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Scott's Instagram Mindy's Twitter Apply to Be a Guest on The Money Show Podcast Talent Search! Subscribe to The “On The Market” YouTube Channel Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets  Check Out Mindy’s 2022 Live Spending Tracker and Budget Hear Our Interview with 4% Rule Creator, Bill Bengen Michael Kitces’ Interview on FIRE and the 4% Rule The “Mile High FI” Podcast 1,500 Days to Freedom Connect with Carl on BiggerPockets Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 298, Finance Friday edition. Carl and Mindy recap on our spending for the month of April edition. One of the reasons we keep track of our spending is to know how much is going out. We based our FI number on spending $40,000 a year, which is approximately $3,000 a month. And clearly, we are not spending $3,000. dollars a month. Our fine number, our retirement nest egg has grown because we have had such a great market tailwind behind us. So we've done really well with that. But if we don't keep track of where our spending is, it's just going to continue to go crazy and it will continue to grow.

And then we could find ourselves out of money. Carl is joining me today. This is my husband, Carl Jensen. You know him from 1500 days.com. and from the Mile High-Fi podcast, also from the previous episodes of this podcast where we have recapped our finances. Welcome back to the Bigger Pockets Money podcast, Carl. Thank you for having me. What's so funny? Thank you for having me.

You're, you know, contractually obligated. I guess not contractually obligated. You're meritally obligated to join me every month. Is marriage a contract, though? Yes, it is. Oh, okay. What else did I sign on for that I did not know about? Everything I tell you to do. Wow.

Read the fine print, folks. Read it. 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's 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.

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Yay! We did not spend everything that we had planned on spending, but we did, again, go over budget on groceries. And we had a medical expense that we just don't count for medical expenses. We are generally healthy people. So we had a medical expense this month that's going to bleed over into next month. So our medical expenses went overboard this month. or over budget this month, and we will have a higher potential or a higher budget next month

to account for those. We also have some travel coming up next month, the month of May. So that will be higher. I'm hoping to also come in under budget next month. With regards to the groceries, we did record an episode that's coming out on Monday, episode 299 with Beth from budget bites.com and we talked about how to get your grocery spending under control. So I have been, not that you can tell from this month's grocery spending,

but I have been working on that and I hope, fingers crossed, that May will be better. I think some of that falls on me. Don't go to Trader Joe's or Costco when you're hungry. Bad things will end up in your car. expensive processed things that you should not be eating in the first place. So yeah, I'm 100% on board with blaming you for that. So there we go. Grocer spending fault, Carl. There are French toast sticks in our freezer as I speak. That should have never happened. It's just in air. I did not buy those.

Yeah, don't let Carl go grocery shopping for you. That's why we were over budget. I was doing so well and then Carl went to the grocery store. Yeah, true. Okay. So, but you know, we're month four. of tracking our spending year long, and it is kind of a grind. And you've, you know, if you've been listening to the show, you've heard Scott and I talk on other Finance Friday episodes where a guest maybe has paid down all of their debt and now they're starting to invest. And it's just the long haul slog part where you're continuing to do what you're doing and you're seeing modest results. The best benefit that we've gotten so far from tracking our spending is just being more conscious of where our money's going and not being so frivolous,

not that you would notice it from our restaurant spending, which was also over budget this month, but not being so frivolous with our spending and, you know, being more conscious of what we're spending on. Wouldn't you agree? I do agree. It's interesting to see what we, it's interesting to see where we go over. I guess the travel thing is the most surprising to me. We spent a lot on that. I think we just spent like $4,000 in plane tickets to go to Germany, which was planned spending. And it was more because we had to book it at the last second, which wasn't our fault. But, yeah, we spend a lot on travel. But I think it's okay. We know it.

And I kind of like it that way because if we ever had a rough patch, that's something we can cut out in a second. Hey, we're going to stay at home. And that's it. Boom. We save a ton of money. As long as you don't buy French toastics. As long as, yeah, well, I'm way ahead of you there. I'm not buying the French toastics.

So good in an air friar? Oh, man. They are good. Not that I got any. No, you didn't get even... I didn't even get one. Yeah, if you ever buy something like that, hide them from the children. Yes, the children ate them all.

They scarf them down. We actually don't have French toastics in the freezer. Remember, the boys ate them. Yeah, not good. We're generally pretty healthy, but... Okay, so not much to report on the spending. front. Going into May, we've got some, I've projected our budget. I hope to come in, you know, under budget. Carl's sister is graduating from college. Hooray, congratulations,

Lisa. So we have a couple of trips planned in May. You will see some spending in future months. If you're following along at biggerpockets.com slash Mindy's budget, you will see future spending months have already, or future months have travel spending in them already. We've already purchased the tickets, but we're tallying them in the month that we are using them. Otherwise, we would have some really crazy budget months when you buy last minute tickets to Germany with no discounts available. That was not planned. And the reason we did that is because it's a school trip that we're coordinating with and the school bought them last minute as well. They didn't even know what the dates were.

So it is what it is. Yeah, we do have some fun trips coming up in May, though. We were going to Las Vegas for the graduation, and then we were going to camp mustache in Washington State at the end of the month. So if anyone has any recommendations for Seattle or Las Vegas, where should they write the comments? Put them in the comments? Put them in the comments here.

Or we will have a post in the Facebook. group, Facebook.com slash groups slash BP money. You can post in the comments in the Facebook group, or you can email me, Mindy at biggerpockets.com, if there's something you don't really want to share publicly, like, hey, come visit me. We have a pretty tight timeline, though, because we go to Camp Mustache and then we come back, I have to come back early to put my daughter on the plane to Germany. Is there anywhere you're looking forward to going in Las Vegas?

of one, but I'm curious to know if you have any. In an Out Burger? In an Out Burger? Okay. And mine is there's a donut place called Carl's Donuts. I didn't know about Carl's Donuts. Yeah, and it has good reviews. It's like over four stars on Yelp or whatever.

It seems pretty solid. So this doesn't sound like a healthy trip. Perhaps a continuation of the French Toastik saga. What trip to Las Vegas is healthy? True. I'm going to go to Las Vegas and lose weight, said nobody ever. At least we don't lose money. Gambling, no. Donuts. Yes, we are team donut.

We should say that your family lives in Las Vegas. We're not going to Las Vegas as like a celebratory trip. It is a celebratory trip, but it's because they live there, not because like we're all taking a weekend to go to Las Vegas. Yeah, we would not be going if it wasn't for our family commitment. Yes. Okay. So that kind of wraps up April spending because there wasn't really a lot to talk about for April spending. What we really want to talk about is, I don't know if you know this, but the stock market's been a little squibbly lately. Yeah, I think the NASDAQ had its worst month. April was the worst month since COVID since I think March of, when was COVID 2020? When was COVID? It still is, but yes, March of 2020. Yeah, I guess COVID still is, but we took a big

drop then, and I think the NASDAQ was down 13% last month. And we happened to have, have a lot of investments in big tech, and that got hit even harder. I think Amazon was down 14% last week. What's our stock portfolio down, sweetheart, darling? I think it's down about 25% from its all-time high, which was within the past six months. So let's break that down for a minute. The NASDAQ is down 13%, but we're down 25%. Why? Yeah, and that's a little bit different because the NASDAQ was down 13% in one month, and I don't know what we were down in the month, but when I said we're down a quarter, 25%, that's over the past six months or so. But yeah, I would say we were probably down more than 14%. Is that because we are in an index fund,

or could that be because we are invested in specific stocks, sweetheart? So with the qualification that we are indexed investors now, prior to that, we did not know what an indexed fund was. And this has done very well for us. We bought Google and Facebook at the IPO, Google IPO it in August 2004. We bought Tesla in 2012. So it's done very well. It's definitely, we have outperformed the indices, at least in the time we've had it. But for that ride-up, you're going to have to endorse some ride-downs too. And last month was a big ride-down. I would think that if you are outperforming when it's doing well by picking and choosing individual stocks, you would also outperform when it's doing bad. Like you'll do better than the index when it's going well.

It depends on which stock you're doing. Yeah. Never mind. Yeah. What happened with this is big tech as a sector did really well during COVID because everyone's working from home. We need software for that. Everyone's buying stuff from Amazon. everyone is on Facebook because they have nothing else to do.

They're sitting in their basement quarantine, which actually happened to me. Yeah, and then all of a sudden the world opens back up, and no one gives a beep, beep about Facebook or anything else, which I think is good. I'd rather see the world in that place and have our tech stocks go down. So the whole sector went up and the whole sector went down. But for the long-term investment investor, which is what we all should be, this means nothing. This is a blip. I mean, if you look at the stock market from when you zoom out, and I will include a link in the show notes to the stock market, like what, from 1900 to now, you can see this overwhelming up into the right. But if you zoom in, it goes like this. And some days it's down and some weeks it's down, some months it's down. But it goes up eventually. And, and, you know, some weeks it's down, some months it's down. But it goes up eventually. And, and, The thing is, the stock market, the NASDAQ, the New York Stock Exchange, the stock market that we are talking about is the American stock market as a whole.

And this is kind of the health of the American business, American corporations. I believe in the overall health of the American economy and the American business. I mean, is the stock market going to go to zero? We have so many other problems if the stock market goes to zero, like mass rioting in the streets and yada, yada. I believe that the stock market is not going to go to zero. I believe that the stock market will go down. I believe that the stock market will come back up. I can't tell you when or where, but I'm not investing for tomorrow morning.

I'm investing for the future. I have taken care of tomorrow morning already. Yeah, and I would zoom out. You said in America, but I think overall the world is becoming a better place. We have little blips. We've got a big blip going on right now. But overall, I have to believe the standard of living is going up for everyone generally over the long term. And that's good. That propels economies up into the right. And that speaks to how you have to have optimism to be a long-term investor, too. If you think the world is going to a bad place, then you might be freaking out now, but that's not what we believe. No, I believe that the world will continue to do well. And there will be down months and down years, but overall, the world will continue to do well. Yeah, and a lot of data supports this. You wouldn't believe it if you listen to cable news channels on either side of the political spectrum because they profit off scaring you. But if you look at raw data like,

standard of Loving? I think in the 1900s, like probably most houses in the U.S. didn't even have indoor plumbing or a high percentage. You think of that and look where we are now. There's people flying into space. 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. 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, 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. You just realized your business

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Anyone can call or text for free confidential support from a train responder anytime. 988 suicide crisis helpline is funded by the government in Canada. My grandmother, my dad's mother, had an outhouse. And they eventually had indoor plumbing. But they had an outhouse. I never used it. But my dad used it. Let's move to talking about retirement.

Because when you retired, you retired into a up market or it had been going up and it has continued to go up since you retired. Has it been five years since you retired? Yeah, it has. April and last month was my five-year anniversary. Can you believe that? That is crazy to me. That's so strange. Was it only five years?

Yeah, 2017. Wow. So he is retired and the market continued to go up. And that worked out great for you. We were talking last night about the market being down. And I said, I asked you, what would you do if you were about to retire? And then you had last month. Yeah. I'll start this off with saying one of my favorite investing quotes. And this is from Warren Buffett. He says the stock market is the only store where people run for the eggs as well it's on sale. And what that means is we've got this herd mentality when there's drops or people are scared. People will sell their stocks, but it's the worst time to do that because the store is on sale.

So why are you selling? You should be buying at that time. So if I was planning to retire soon, I think what I would do, at least for a short amount of time, is postpone it. I might stick around for another six months if I hadn't. maxed out all my retirement accounts yet, maybe a 401k, I would definitely do that. But yeah, consider staying on for a little bit longer. And if I had retired, we'd probably be pretty conservative. If we had just retired into this, we've got a little bit more of a buffer now. But say we didn't, say we were right at that 4% line. We'd be pretty conservative. We sure as heck wouldn't be going

to Germany or, and we might be driving to Las Vegas in our old car. of a flight and staying at a campground somewhere. But yeah, and I might consider some kind of side hustle just to ride over this blip. Because this is a pretty significant blip. We have two things going on right now. We have inflation and then we have the war in Europe. But these things too shall pass and it'll be better if you can ride these things out. I think you might be in a little bit better shape and be able to sleep a little bit better at night.

What do you think? When we were talking to Bill Bingen, who is the creator of the 4% rule, he said that the 4% rule, the number 4% is the absolute worst case scenario. That is the safe withdrawal rate. But the actual withdrawal rate that you could most likely get away with is 6% or 7%. The 4% comes into play because there were a. few years where people retired into periods of high inflation. And this was the early 70s, the late 70s, where interest rates were just insane. And inflation was going crazy. I think it was

the late 60s and the late 70s. I believe they had periods of incredible inflation. And if you look at Michael Kitsis' extrapolation of the data after he picked up where Bengen left off. Kitsis has, I think, three years where the numbers, after 30 years, they dropped below zero. They ran out of money. And those were people who retired right at the beginning of the high inflationary period at the end of the 70s, early 80s. So it really isn't a super scary time yet. If this war in Ukraine continues to go on. If we continue to have incredible inflation, we could start to see issues where your retirement could be affected. But again, you're going to know, it's not.

not like you're going to be just chugging along and then all of a sudden, blam, no money. Hopefully you are keeping track of it. One of the reasons we keep track of our spending is to know how much is going out. We based our FI number on spending $40,000 a year, which is approximately $3,000 a month. And clearly we are not spending $3,000 a month. Our FI number, our retirement nest egg has grown because we have had such a great market tailwind behind us. So we've done really well with that. But if we don't keep track of where our spending is, it's just going to continue to go crazy and it will continue to grow. And then we could find ourselves out of money. I think that once you retire, you don't just stop paying attention. You shouldn't just stop paying attention to your

spending. You shouldn't just stop paying attention to your net worth. You shouldn't just stop paying attention. That doesn't mean you have to check it obsessively every single day, like some people sitting in these chairs. You can keep an eye on it, but you should keep an eye on it. I think the tracking spending overall is a good thing. You don't have to keep tracking your spending as granularly as we do, have one credit card and, you know, just look at it at the end of the month. Oh, wow, I spent $17,000 this month. That's a lot. Or I spent $3,000. I'm doing great. You know, you just need to keep track of it some way. And it doesn't, once you get to the end point where you are retired, you can loosen up things a little bit, but you still need to keep

the numbers in your head. Do you think inflation affects retirees or early retirees more or less than non-retirees? Oh, it affects them more than non-retirees because non-retirees are still going to be generating income. How about from a spending standpoint, I guess that's what I was thinking of. Oh. I don't know. What do you think? It's interesting.

I think about it. So I think our transportation costs are definitely less. We don't have any job to drive to. So we're spending less on fuel and perhaps less on cars. But that might be less important now because more people are working from home than ever. On the other hand, if you're in your house 24-7, you have to pay to heat it and cool it. You're not relying on a job to do that. When I went to work, I would crank down the temperature in the house.

I'm not heating or cooling a house than I'm not in. So, I don't know. I think it probably affects the retiree a little bit less, but maybe not as much as some would think. We still have to buy food, and there's inflation there. I guess it depends where exactly inflation is hitting. Well, where is inflation hitting right now? It kind of feels like it's hitting all over. Yeah.

Is there anything that's not hitting? I don't know. Yeah. And the food could be ramped up if wheat shipments are delayed or stopped in Europe. So, maybe we should have an economist on the show. Yeah. Is there anything else you want to talk about on this episode? I don't think so.

We have the two trips for May. Do we have any other goals or anything that we think will spend more on or that we're going to spend less on this month? I have continued to keep my grocery budget at $750 this month, even though I've never come in under $750. $150, except for January when I was really, really, really trying. Again, we've got Beth from Budget Bites coming up on episode 299, which releases on Monday. And she gives some really great tips for how to get your budget in check.

And I've already started implementing some of those. I'm really hoping to come in under budget for groceries. Fingers crossed, send me your super cheap recipes. I'm going to be eating a lot out of the Budget Bites recipes. and just really shopping my cabinet as much as possible. Cool. Anything you want to add? I think that's all.

Okay. From episode 298 of the Bigger Pockets Money podcast, he is Carl Jensen, and I am Mindy Jensen, saying, Out the door, dinosaur. See you later, alligator? That's weak.

Yeah, we've used that like so many times. What's something that? that rhymes with another dinosaur. See you next, Tyrannosaurus Rex. Oh, that was a good one. I've never used that one before. Okay, bye.