BiggerPockets Money Podcast - 313: The “Perfect” Investment Portfolio for Early Retirement w/Ask The Money Coach

Episode Date: June 27, 2022

Early retirement is one of those common personal finance topics that always comes up on the show. It’s arguably the most talked-about subject in our Facebook group and is a common theme among guests on the show. But what does a time-tested, well-respected financial journalist and coach think about retiring early? What does the “perfect” early retirement plan look like if you’re starting from scratch? Today we’re joined by Ask The Money Coach’s Lynnette Khalfani-Cox, who is used to getting personal finance questions thrown at her all day long. She’s dug deep into everything surrounding investing and early retirement. From stocks to I Bonds, to real estate investing and cryptocurrency—if you’re interested in building (and maintaining) wealth, Lynnette’s website and books have something that will help you on your benjamin-stacking journey. Mindy and Scott take some of the top investing, saving, and retirement questions from the BiggerPockets Money Facebook Group and ask Lynnette her opinion on them. Hear answers to top questions like when to invest and when to pay off debt, what makes the “perfect” portfolio, how to stop saving and start spending when you retire, and whether to invest for retirement or start a business. In This Episode We Cover The debt payoff schedule you should follow if you want to invest while shedding consumer debt I Bonds explained and how to get around the $10,000 personal purchase limit Transitioning from “save mode” to “spend mode” when you’ve hit your retirement goal How to introduce others to personal finance (without it sounding like a lecture) What to do before you start a business and getting your personal finances in order Why younger generations of investors are choosing more “risky” investment options  And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Mindy's Twitter Scott's Instagram Apply to Be a Guest on The Money Show Podcast Talent Search! Subscribe to The “On The Market” YouTube Channel Biggerpockets Bookstore Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets Fueling Early Retirement at 36 with Just 4 Rental Properties Investopedia Stock Simulator Money Coach University Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 313, where we talk to Lynette Calvani Cox, the money coach, and to get her take on some of your big burning financial questions. Anybody who's seriously considering entrepreneurship should absolutely get their personal finances together as best they can first. They should map out what it's going to be like to potentially draw no salary or to have to spend and or heavily invest in the business for at least one year. And so I think a lot of times that goal versus no-go decision might be better determined based on answering the question, am I truly ready?

Hello, hello, hello. My name is Mindy Jensen. And with me as always is my analytical co-host, Scott Trench. It's great to be here with my insightful co-host, Mindy Jensen. Scott and I are here to make financial independence less scary. less just for somebody else. To introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting. That's right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business.

We'll help you reach your financial goals and get money out of the ways. You can launch yourself towards those dreams. Scott, I am excited to bring on Lynette Calfani Cox today. She is the money coach, a recognized personal finance expert. And we had a bunch of questions from our Facebook group, and she's here to answer the money. today. 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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You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves in Edle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code. pockets. I love Matt, said no one ever. Nobody starts a business thinking, you know what would make this more fun? Calculating quarterly estimated taxes. But somehow every small business owner ends up doing it.

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with Fowl. 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 Leaner Stronger for Fitness, the Anxious Generation for Parenting Perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful is its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app.

If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP Money. Lynette Calphani Cox is the money coach. She's been talking about money for a very long time. First, as a reporter for the Wall Street Journal and CNBC and the Associated Press and a tiny little outfit called The Dow Jones Company. Maybe you've heard of what they do.

She's a recognized expert on money and personal finance. She's written 15 books on our favorite subject, including the New York Times bestseller, Zero Debt, the ultimate guide to financial freedom. Lynette Calvani Cox, welcome to the Bigger Pockets Money podcast. Thank you so much for having me. Like I told you guys, I was looking forward to this conversation. I'm so excited to talk to you, the money coach. You have a website called Ask the Money Coach, and that's exactly what we're going to do today. We reached out to our Facebook group and we said, hey, we've got the money coach coming on

the show. What do you want to know? And they wanted to know a lot. The first question they wanted to know about has to do with debt. Since you just wrote a book called zero debt, let's talk about debt. We frequently talk to people who have some debt, but they also want to start investing. So what do you say they should do? Should they start investing first or should they start paying down debt first? And sister question, could they do it both at the same time? So I actually think you absolutely have to do both simultaneously. A lot of folks consider it kind of like an either or proposition. And that's really the wrong way to look at getting ahead financially. Let's be honest. Americans are up to their eyeballs in debt. Student loan debt, credit card debt, big mortgages.

some people have personal loans, business loans, etc. So if you were going to just wait to invest until you paid off all your debt, you might not ever get around investing. So it's just like people who ask me, should I save first or pay off my debt? Should I invest first or pay off my debt? You actually should do both simultaneously. It's in your long-term best interest.

You want to give yourself that running start that investing early provides in terms of compounded interest over time. And of course, you want to knock out those high rate credit obligations, the stuff that might be, say, 16% or so. If you have credit card debt, that's lingering. But chip away at it. Do yourself a favor. Prioritize based on what's most important to you.

If growth is most important to you, for example, you might think about doing a little more on the investing side, but split some of those dollars. Knock out debt, do it regularly. and invest. How do you think about that prioritization? Are there certain things you'd knock out first, like HSA or a 401k match or these other types of things? How do interest rates play into that? What are the nuances for you in a situation where someone has debts and wants to invest? So on the debt elimination front, I really tell people to kind of tackle their area of pain first

and what bothers them first. Generally speaking, I like to see people get rid of the high-rate consumer debt, the sort of quote unquote bad debt, stuff like credit cards as opposed to say student loans, which we can argue about whether it's a good or bad debt. And I actually think that all forms of debt can be bad debt or can become bad debt if they're either excessive or if you don't have a plan for how to pay them off. So sometimes, of course, folks will say mortgages are good debt because you can leverage it and you can build wealth from it. Student loan debt is a form of good debt because you can buy.

boost your earnings potential, potentially increase your ability to generate a higher income over time. But, you know, credit card debt or that auto loan you might get, as soon as you drive that vehicle off the lot, it's depreciating in value, right? So in terms of prioritizing the debt elimination, I would go after the credit card debt first and then things like auto loans and then things like student loan debt. And lastly, mortgages for folks who want to be debt-free and just either buy in cash or if they're heading into retirement and they don't want any mortgages. Then in terms of the investing side of it, I mean, that's a, you know, that's a pretty big

question about, you know, what people are going to be prioritizing. Obviously, you're going to be looking at things like your risk tolerance, your goals, your investment time horizon and what it is that you're actually investing for, right? So some people are saying, oh my God, I've got a five-year-old. old 13 years from now, all of what I'm doing is focused on making sure that, you know, she's going to be good for college, you know, in 13 more years. Some people are totally trying to fire out. They're trying to, you know, retire early and they're trying to invest as aggressively as they can so they can check out of the workforce. So it is, of course, a lot of it is

dependent upon what your specific goals are. But again, don't, you know, be a, a, you know, be a, reluctant to kind of split it a little bit there and to say, okay, I only have X amount, because none of us have unlimited source of funds, whatever the number is for you, and let's just use a round number. Let's say you have $1,000 a month to kind of work with. You might say, it's really super important for me to be debt-free. I don't want to owe anybody anything. So, you know, maybe you skew towards paying $600 or $700 out of that $1,000 towards debt elimination and then you put three or 400 towards investing as a whole. I like that. Come up with a plan. I think that is going to be incredibly helpful going forward.

You can't just willy-nilly yourself to wealth. You have to have a plan in order to be able to move forward. Otherwise, you will just willy-nilly yourself. And I don't think anybody ever willy-nilly themselves to wealth. Okay. The next super hot topic in Personal finance is iBonds i don't know if you know this but as of today they pay 9.62% which sounds fantastic. Ooh, I love a good 9.62% super safe return. But I think people don't understand all the rules around iBonds. So let's talk about those for a minute. What are your thoughts on the eye bond and what are, let's just make sure that everybody knows all the rules involved in in the I bonds. Sure. So first off, obviously, anybody who's a saver is thinking about yield and about

ways to get more return on their cash. And you know, you go to a typical bank, even, you know, digital banks and others, most times people are getting, you know, under 1%. So the fact that you could get at least through right now, through October 2022, 9-1%. $9.62% by buying these I bonds is hugely attractive, right? So first off, the first rule is the cap or the limit on how much an individual or an entity can buy, and that's $10,000. So if you're married, you can buy $10,000 individually, though, and your spouse can buy $10,000 worth of eye bonds as well. You have to keep the money in there. you can't touch it for one year.

And then later on, when you're actually trying to cash out, if you pull your money out early, you'll have to pay about three months' worth of interest based on, you know, kind of prevailing rates at the time for if you pull the money out early. So there's a little penalty involved on the back end if you stop early. But honestly, I think it's kind of negligible.

in the scheme of things. But one thing I really want to emphasize to the audience because a lot of people go, okay, well, yeah, it's just $10,000. But think about all the ways in which you can purchase eye bonds and make that $10,000 go up dramatically. So as I mentioned, your spouse can also buy $10,000 worth of eye bonds. But if you have a business, a business can also buy $10,000 worth of eye bonds. If you have a trust, and I know a lot of your,

audience members do. They may have an LLC or a trust in various forms, either related to their real estate holdings or their personal assets, etc. The trust can also buy eye bonds as well. So just kind of think about all of the entities that you might have or have access to where you can be able to shovel a little bit of cash in there and get that really super safe, juicy, return. And, you know, I love something that's protected by the, you know, full faith and credit the U.S. government that's, you know, that we can, despite everything that goes on in Washington, that we can feel pretty good about that, you know, we're not going to, there's not going to be default on it. So, so I love I bonds. You just said two things that I didn't know about before.

You said, I can buy, and I knew that. And you said my spouse can buy and I knew that too. So that's $20,000. You said my. business can buy, so that's $30,000. And my trust can buy, so that's $40,000 in I bonds that I could, that I and my husband could buy together. That's a lot more attractive than, and I feel like such an awful person for saying than just the $10,000. It isn't just $10,000.

It is $10,000, but it's, you know, I don't like it. I don't like my funds being tied up for a whole year. But $40,000 growing at 9% interest is a lot more attractive. I could, you know, if there's going to be a bigger payout, tying it up for a year is, I know it sounds counterproductive, but in my mind it works. No, it's exactly how it should be because think about it, the longer out you go, the more you need to be compensated for tying that money up or for the risk that you're taking and the opportunity cost that's involved, because you could be doing something else with that money.

So that's, and especially now, of course, if you're looking at what's happening in the stock market, it's like, woo, kind of getting, you know, almost a guaranteed, almost 10% over the next, you know, almost a year. That's a pretty attractive return on your money. That's for sure. Yes, I'm not getting that in the stock market right now. Does the return, is the return guaranteed? I'm going to get that for the next year. or can it change if the CPI changes in six months from now? So yeah, they do. It does change.

So that's why, like right now, the current 9.62% rate is in effect through October 2020. Great. So I'm going to earn a 9. What is it? 62% through October on six months. And it will change again. It could go down or could go up. CPI continues to remain really high.

And obviously, you know, nobody has a crystal wall. But, I mean, geez, look at how much inflation has been raging. We've seen inflation at pretty much 40-year highs, right? And so I don't know, you know, to many people who are saying that, oh, you know, we're going to go like totally the opposite direction and see, like, you know, this huge drop in this accelerated pricing that's been, you know, in so many areas. of everything. The price of everything is going up. Homes, you know, cars, food, oil, just, you name it. So I think when we start to look at CPI and some of these other measures, you know,

they're going to, things absolutely change. But I feel like this is going to be an area where you're going to get juicy, healthy returns for some time to come. One of the topics that we've been noodling on lately has been this concept of the perfect portfolio. Like what is the perfect portfolio for someone? And it depends on your goals and that kind of stuff. But let's create a fictional scenario and say if you're starting from scratch and you're handed $1.5 million, how would you design that portfolio? And why would you design it that way? So, I mean, I hate to sound like a financial advisor or a CFP because I'm not, I'm neither. You know, I'm a financial educator.

but probably they've indoctrinated me for so long for so many, for two plus decades. And I'm probably echoing some of the sentiment here. But it depends. I mean, so who are we talking about? Are we talking about a Gen Xer like myself? Are we talking about somebody who's a baby boomer? Are we talking about a millennial who's, you know, 30 years old? Then, you know, that portfolio of the control.

Let's create a persona. There we go. Thank you. Help me out here, Scott. Bradley's 35. single. He wants to become financially free. He makes about $110,000 a year, spends about $45,000 a year, would like to be financially independent, and thinks that $1.5 million might just get him over that barrier. How does he invest it for early retirement from that position? Okay, so that's great. You said his name is Bradley. That's our fictitional.

Bradley. Bradley is our fictional. Okay, Bradley. I can work with Bradley. That's a great one. So, wow, Bradley's got a lot of advantages. First of all, no kids, okay? So, and making $110,000 a year is good given, you know, is good given, you know, nationally U.S. household income about $60,000 or so. And him wanting to target early retirement, let's say 50, 55-ish years old. No, no, he wants to retire right now. Well, early, my, geez, okay, let me reframe here.

let me, I'm sorry, the gin Xer and me came out and, you know, I forgot, you know, everybody wants to retire like yesterday. So, yeah, so 15 years is like, oh my God, are you kidding me? That's like way too long. So just, again, just to be clear, are you saying that he actually has amassed and has an asset base of $1.5 million? How do we construct it? He's got $1.5 million after tax sitting there in the bank account needs to be allocated for a portfolio that will sustain financial freedom. Okay. So, all right. So you look at, you know, things like what his withdrawal rates might be and what his sum of his spending. You said he's going to be spending about $40,000 a year. So he can very easily and safely withdraw 4% and cover that and not have a problem at all.

I tend to, since he's quite young, I tend to go heavy on stocks, on on the investing side, as well as if he had an appetite for it for real estate. I'm certainly super bullish on real estate, and I know, of course, a lot of your audiences as well. I won't say my age. Let's just let the audience, you know, pretend they, you know, pretend I'm a millennial, let's say. Pretend I'm 30, I'm 35, but I think if you kind of flipped Bradley's age, then you'd know what my real age is. Let's just say that. Okay. So, but my husband and I own, you know, and invest in real estate. We have seven properties.

We're more bullish on real estate, frankly, than we are on the stock market. However, I actually do think that a nice split for somebody who's, you know, 35-ish would be probably having about, you know, 40 to 50 percent of their assets in the stock market. either mutual funds or ETFs, exchange traded funds. And I would be looking more on the growth category for him. You can, you know, kind of round it out and look at value plays as well. But because he's young and potentially could live to be 90 or 100 years old, you absolutely want to make sure that he's getting good yield over time. And of course, we know historically the stock market has returned about 10% on average every, you know, every decade on an annualized basis. So I think that for a lot of 35-year-olds, they might be like, yeah, 10%, that's, you know, let me jump into my crypto.

Let's start talking about some of these other things. So don't worry, I'm going to get there as well. But I just wanted to say that if somebody did have an appetite for property, I absolutely think that buying earlier is actually better. And I would still, even with, of course, rates being on the rise and unfortunately prices being on the rise as well, I would still tell somebody who's in their 30s to absolutely get into real estate, to pick their markets, to really think about using their capital in smart ways where they could have some rental, properties that are going to be throwing off cash. So again, for us, ours is, you know, more like

70, 75% in real estate. And that's just our own thing. But again, I'm just, you know, kind of talking on the fly here to you to tell what if somebody might do. Honestly, on the fixed income side, and then on alternative investments, whether that's like crypto, I, I, I, I, I'm actually quite bullish on cryptocurrencies. I would stay in what I consider to be a little more solid zone in terms of Bitcoin, ether, and kind of stay away from some of the alt-coin, some of the more speculative plays. I totally recognize that a lot of 30-somethings are like, that's where the money is. I want 2,000 percent returns and that kind of thing.

Again, sorry, the money coach in me, indoctrinated. as I mentioned by the financial advisors, are saying, you know, absolutely take a portion of your money and put it into that. But I would think probably, I think for a 35-year-old, 10%, you know, maybe even 15%, if they wanted to be a little more aggressive, 20% in that space would be just fine. So I don't even know where I am in terms of the math now. I said about 40% in equities. if you're going to do maybe 40% equally in property or in real estate, anywhere from 10%, 20% in, say, crypto or alternative investments. Again, he doesn't make $200,000.

He's not an accredited investor or anything like that. The rules are changing around some of that stuff. But increasingly, we're doing private equity and other stuff too. And I think that I'm like, I should have been doing this. when I was, you know, earlier. But I don't know. I don't know if that answered your question good enough. I think it's really helpful.

Yeah, I think it's just, it's just fun to hear people think through these portfolios. It sounds like 40 stocks, 40 real estate, 10 to 15 on crypto, maybe the rest in cash or alternatives. Is that kind of the, yeah. And I would totally agree with a split like that, for example, with that. Like, that would be exactly what I would kind of be thinking around that. The real estate asset value, the question I always think about is like, okay, the real estate asset value, if I put, you know, 500 into real estate, I'm really buying two million worth of

real estate. My portfolio is inherently overexposed to real estate because I'm leveraged against it, most likely, if I'm buying it. So always something to kind of think about how that works out. But yeah, I think that makes a lot of sense. I think that would throw off cash to give a lot of growth, some exposure to the other things. I'm personally not a big crypto guy, but that would, but I think that a lot of folks, a lot of Bradley's are. Yeah. And more than Bradley's, I tell you, A lot of Brianas, a lot of, you know, Beckys, a lot of, a lot of folks are. I mean, increasingly across the spectrum, you know, I saw this thing. And I think it was in the Wall Street Journal.

And it was talking about among African American. And I want to say it was either millennials or Gen X. I can't even remember. But it was saying, you know, what do they feel for these African American investors is the number one best thing to invest in? and it was crypto. And I was, and I was just like, part of me went, you know, because I see that, I know that, first of all, it's, it's a complicated area. And it's, you know, even though, again, I'm very bullish. I tell people, yes, you should invest in crypto. So it's not like I'm anti-crypto or anti-Bitcoin or anything like that. But I do recognize that. There's a huge learning curve.

And you, and you have to do your homework. And you have to, there's a lot to understand. in that marketplace. And frankly, I think the main thing, this is the number one thing, is really, if you're not going to be trading and if you haven't literally taken a lot of time to learn a system to, you know, to actually trade and most people aren't and shouldn't be trading if they haven't, you know, learn from somebody, then I think you should just be in it for the long haul. And then you have to be willing to weather all of this volatility. So if the stock market feels like a roller coaster for you, geez, you spend a day and, you know, throw

$10, $20, $50, $100,000 into crypto and see how your stomach feels after that. You have to be prepared because it's a wild, wild ride. And believe me, I know, because I'm in it, you know. That made my whole stomach churn like I was on an actual roller coaster when you said that. Bradley can tolerate it, though. Bradley can hang. He can, you know. Bradley has, Bradley can have my share of crypto because I want none of it.

But I am firmly in Gen X and I don't understand crypto and I believe that you don't have to be in everything. So I would take your 20% crypto and split it 50, 50 between real estate and stocks. And that's actually what I've done. I am 50, 50, 50 real estate and stocks right now. And that's what I feel comfortable when what I wanted to highlight is what you just said, do your research. and crypto market is volatile and you have to be able to weather the storm. So if the stock market feels super squidgy, you have no idea what squidgey feels like until you get into the crypto market.

Just watch it for a week. Pretend you have $100,000 in there and watch what it does. It just goes like this up and down all the time. For those of you listening and not watching me, I'm just moving my hands. Yeah, and not only that, you know, you don't have to just watch it. You can actually, you know, trade in a simulator, right? So you can see what it feels like, because it does replicate that feeling. You can use, you know, there's any number of trading simulators that are out there. Investopedia, I believe, has one trade and travel, I trade and travel, which is a program you can, you know, do to learn how to, to learn how to, trade stocks, but you first start off in the class by trading in a simulator. And then you can, you can see like what that, what that feeling is like because you absolutely have to learn how to manage your emotions. You know, one of my books, I wrote a book called Investing Success,

how to conquer 30 costly mistakes and multiply your wealth. And one of the biggest mistakes that people make is not having a sell discipline, not knowing when to sell, underwerexie. what circumstances, why, how to sell in a tax efficient manner, et cetera. And so for people who are just like, oh my God, this is down 30%, I'm out, you know, that's not the way to go, you know. So you should kind of, you know, have a game plan going in. Absolutely do your homework. And the last thing I'll say about crypto and then, I guess we can move on.

Again, my suggestion for a 35-year-old who I know, because I'm looking at the future of of where I see mostly blockchain technology and the extent to which it's going to underpin the digital finance, the digital economy, that's part of what gives me much more confidence and say Bitcoin, not to mention the scarcity component and the, you know, only 21 million coins, et cetera, et cetera. But overall, most financial advisors that are, you know, kind of, you know, tiptoeing over there and starting to embrace, not a, if not embrace, but, but maybe give a slight hug, a slight hug to crypto, or a passing, kiss on the cheek. I don't know, whatever you want to call it.

But they're usually recommending anywhere from a 1% to about a 5% allocation. Most of them don't even go much above 5%. I do think, again, that younger folks can afford to be a little more aggressive, but you just have to be willing to write it out a little bit more. You have to stay in it longer and have a bit of a longer time horizon. And if you look at the data, I mean, people just get in and out of position so fast nowadays. They're essentially, you know, trading more than they're investing. But for a whole host of reasons, obviously, I think the longer term outlook serves you best.

Yeah, I like that you use the P word again, plan, have a plan. 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,

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slash money free. Okay, so part of my plan has been to save and save and save and save and save for retirement. And now my husband is retired and we need to start spending. But it's really hard to transition from your savings mindset to your spending mindset. to your spending mindset. And we don't need to spend, you know, now, ooh, now we got to spend, spend, spend. But it's really hard to transition from that savings mindset

to the spending mindset in retirement and in early retirement. So how can somebody flip that switch? So you can't flip a switch. You really can't. I mean, listen, you spent, a lifetime, practically, your husband has working, amassing assets, being in the accumulation phase. And now you're in the, or he's, and you are presumably also able to put your hands on some of that money. Now you're in the withdrawal phase, right? And the reality is that so much

of personal finance, of course, it's personal. It's the psychological. It's the emotional. It's the emotional. it's the stuff behind the financial actions or the numbers on a spreadsheet or on paper. And so I do think that there's transition time that's required to, it's like you have to allow your brain to catch up with the fact that it's okay for me to spend. And you know what? This was part of the plan. And you might just do little by little. Like some people were like, oh, we really didn't vacation much or we didn't go out to eat or

we never traveled to, you know, see the grandkids once or twice a year or whatever it is, right? And so I think that baby steps are actually prudent because, you know, we'll be unto the person who's like, woo-hoo, I can spend now, you know? And most people aren't going to kind of feel that way, but some actually do. They're like, oh, I'm retired. Okay, I'm going to hit this. I'm going to do everything I always wanted to do. And that first year, two, three, they might have a serious burn rate.

And then they might think, oh, my goodness, I have to slow my role a little bit here. So I think it's better to err on the side of caution and to, you know, maintain a little bit of a conservative mindset fiscally to just know that I'm not going to deplete everything. I still have a long life ahead of me. I hope to live decades more. and to do things incrementally and to start with categories and then to start with one or two things and then to build upon that, right? So I happen to be a money expert also for AARP. I've worked with them since 2010.

They've been a client. And so I'm very familiar with this transitional phase and how hard it is for people to, we've been hammering them to their head saying save, save, save, save, invest, invest, invest, don't spend, don't spend. And then all of a sudden you're like, okay, you can go out and spend. And it's like, wait, uh, sometimes there's fear of risk, fear of loss, fear of depleting assets, fear of running out of your money, a whole host of things. But again, psychologically, the brain needs time to adjust. I was sharing with you, Mindy, before we came on live that, um, and your audience may see me keep, you know, tugging at my, uh,

earbuds here that, you know, since October, my husband and I have been on a massive health and fitness journey. We've each lost over 60 pounds. And thank you very much. Congratulations. That's fantastic. Wow. Yeah. And so, but I cannot tell you how many things I do that I'm like, oh, I can do that now. but my brain has had to catch up with it to like literally because I'd had a back injury before everything that I did when I would sit down when I would get in and out of the car and not a chair and in a bed, etc. I was compensating and moving my bodies in certain ways to not trigger a re-injury. But now I'm like, I can just move.

I can just do it. I can just, but my brain had to catch up with that and even to see myself the way that other people see me and say, oh my God, you've got so much weight and blah, blah, blah. So it's only just now, six, seven months in, starting to go like, oh, okay, yeah, I can tell my body to do something and it complies, you know. So I just draw that analogy to say that, again, we all have to, after you've been doing something for so many years a certain way, you got to give your mind, your emotional state, time to catch up. And that's okay. Well, when I, I think a lot of people, when they get excited about financial independence or just personal finance in general, they kind of

go down this rabbit hole and get really excited about it, maybe read a lot about it, maybe obsessive for a little bit, and want to share that with other people. And sometimes, you know, I found that can be very annoying. I can be the one annoying other people about that with that. What is kind of a healthy way to make others in your life aware of financial dependence or good money habits or whatever without stepping on the toes of friends, family relatives, and especially with like children, high schoolers or college students as they're getting ready to kind of enter the workforce. Well, that's a great question. And I have, you know, kids in that area as well.

So let's start with the second half, dealing with the kids, because I happen to have a recent college graduate. She graduated a couple of years ago. She's 24. I have a current college student. He's 22. He's a senior in Raleigh. North Carolina State University graduates this year. And then I have a 16-year-old who's finishing up 10th grade. And so she's a college-bound teen. So needless to say, I have college on the brain,

right? But so, you know, my kids, you know, they've grown up hearing their mom talk about money all the time, et cetera, right? I think that for young people, part of it is about making it fun, relatable, engaging, and not something that just automatically feels like a chore. So my kids absolutely know, like, we emphasize sort of like five core values. First, that money is earned, that you got to work for it. This is, yeah, mom and dad might have to have money, but you have to get your hustle on too. You got to work, you know. So first, you earn money.

They will inherit money, but we're teaching them that the way that, the way that you accumulate your own wealth is not you don't inherit it, you don't marry into it, you don't get a sugar daddy or whatever, I don't know, but yeah, work hard to get it. And then after that, there's only four things you can do with money. You can save it, spend it, invested, or donate it. And so again, they've grown up hearing that mantra, knowing that, but we try to make it fun also for them. So like my son, for example, he actually, the 22-year-old, he actually is into cryptocurrencies and trading. So I'll talk to him about the stuff that is exciting for him.

Obviously, there's certain levels of gamification that are done to, you know, whether they're kind of stock market games or I mentioned simulators or things of that nature. The goal, though, is to have kind of like less preaching about it and more just engagement in real life stuff. So for, if my daughter, who does have a debit card, the 16-year-old now, so if she's talking to us about wanting to go shopping or make spending choices, et cetera, I am going to remind her about, oh, you know, how much have you saved and what have you put aside and what are you donating to church?

I'm going to have that conversation. But I am also going to say, oh, those are some cute jeans. That's great. Do you want to go to the mall or do you want to go to, you know, buy it online and save some money? So I'm not like stopping her fun and I'm still trying to convey the lessons, but I am trying to hopefully impart values like, oh, we comparison shop for ours, right? We don't just buy something because it has a label on it or whatever. So I don't know.

In a nutshell, I guess for young people I would emphasize making it fun, making it tangible, making it relatable. And you can even do things like I'm a person. I write about like celebrities and money and stuff like that. And I'll just talk about lessons and like what we can all learn from celebrities or whatever. My daughter who's like constantly on TikTok, she's like, she gets all her life information practically from TikTok. You know. What are that, what were those four or sorry five core values that you were mentioning earlier with money?

One that money is earned. I love that. Can we hear the rest of those? Sure. And then after you. after you actually obtain money by earning it, working for it, you can only do four things. You can save it. You can spend it.

You can invest it. And you can donate it or give it away. And so really, everything you can possibly do with money falls under that, you know, umbrella, those four things. So even if you're, you know, kind of protecting your assets in some way, you're spending on, say, life insurance or your, um, creating a trust or you're putting a will in place. You're paying an estate attorney, for example. You're investing for growth. You're investing in yourself.

You're investing in a business. You're investing in, as we've said, equities or fixed income securities or property or crypto or anything else. So the reason I emphasize that is because as parents, honestly, if you really were to look at your behavior and think about like from when you're children, are kids on, what do kids see us doing? Honestly, they see us making transactions. They see us spending. It's hard for a kid to see us saving. They don't just like see the money being electronically deposited into an account or whatever. So we have to be conscious in our efforts

to show kids. If you're going to say you want your kids to donate, you can say, listen, And here's where we're, you know, diverting some of our money to help this organization, this group, this charity, this faith-based institution, for example. If you're going to talk about investing, you want it to be goal-based, of course, and you want to show your kid, oh, here, yeah, we're putting away this money for your college education. And again, we're, you know, having those conversations, for example, with Alexis, with our 16-year-old. So that was that question.

And then the first part, remind me, Scott, because I just went on. and on here. Well, I think you answered. You answered. I was curious about how you teach others about financial independence with that and especially kids. So I think I think we completely covered that and I was really, I really liked those five core values. Money is earned. And then after that, the other four values are you can save it, spend it, spend it, invest it or give it. Yep, that's right. That's absolutely right. And again, it kind of simplifies the whole thing around like the choices that we all have with money and because I really emphasize that and especially to adults I mean obviously we teach kids that but a whole bunch of

adults need to learn that lesson about saving, spending, investing and donating because if you look at what so many people do, they get money in and like the vast majority of it, they're just saving it. So if you sit people down and you go, okay, well how much? What percentage of your money are you investing? What percentage are you saving? What percentage are you giving away? Again, if that's a core value of yours. And then they might be like, well, I just spend everything, you know. So, but once you kind of raise their consciousness about it and make them intentional with how they're allocating their dollars, then they're like, oh yeah, you know what? I want to really make sure I'm investing this amount. From now on, I'm just going to allocate and put this to the side. I'm not. I'm

not saying it's a magic bullet when you just have a conversation with somebody. But preaching, no, that's not going to work. That's, I mean, the holier than thou or the, you know, flaunting stuff in their face, none of that is going to work. It's going to turn them off. What actually does work, though, I think for a lot of adults is modeling good behavior, right? And kind of like, you know, as they say, live in your best life, just like doing you. And then people are like, geez, how are you able to go on, you know, six weeks vacation or how are you able to take off for the quarter or, you know, or whatever it is that you're doing that they would be like, I would love to do that, you know, then you're like, oh, well, you know, we really buckle down, you know, we save a lot on

this side or, you know, cars aren't really important to us, you know, like I shared with my audience recently how my husband and I sold our second vehicle. And people are like, oh my God, how could you live? How could you, you know, can you live off of one car? And I was like, yeah, you can. We did it, you know. It was a brand new car, too. It was a, it was a 2020 vehicle, which we bought in December 2019. We bought it brand new.

And when I tell you guys, Mindy and Scott, this car had just a ridiculous amount of problems. It got hit twice. One just parked in front of our house. One, during the beginning of the pandemic, my husband, was coming back from the vet and just parked at a red light and a guy just bam comes up from behind him and hit him. So, you know, the car was in the shop multiple times, two times multiple months because of supply chain problems. And of course, it was everything under warranty and we had insurance. So, but they were like, we don't have these parts. Sorry. So while the car was there for several

months, we were like, oh, we're getting by with just our sedan. It's just fine. So then they had a recall on the vehicle, a couple of things. So we were just like, is this car cursed? Let this car go. So we sold the car back. We wound up getting back like, you know, almost 10 grand. And because, you know, used car prices are through the roof right now. And so, but the point I was making is that when we told people about this, it made a lot of people go, oh. So I didn't go tell them, you know, you should, you should do this, although actually I did. I went on headline news and I did a segment about it because they told me to come and talk about it. But in general, just to my friends and family and my, you know, audience on Facebook and whatnot, I was like, oh, hey, this is something that

Earl and I did, blah, blah, blah. And then people were like, oh, wow, you know. So again, sometimes just like modeling or just doing something. And then people think like, that's a good idea, you know, maybe I should try that too. All right. Are we, we have one last question here, which is, and I think this is for some of the folks that are really interested in. in starting a business, right? And so how do I make the decision to when I have to make a trade-off, right? I paid off on my debt and do I invest in my 401k or my IRAs or something like that? Or do I stash away cash to invest in start a business? How can I know that I'm getting ready to do that? Or how do I set myself up for that or know when to make that trade-off if I have limited resources

there? So anybody starting a business, generally speaking, it is going to have limited resources. I mean, you know, some people may be more fortunate than others and may have, you know, parents' money or be able to have, you know, a nice rich uncle or somebody to give them the start. But for the most part, everybody's starting out is kind of bootstrapping. So you're always going to be in that situation. What I would say is anybody who's seriously considering entrepreneurship should absolutely get their personal finances together as best they can first. They should map out what it's going to be like to potentially draw no salary or to have to spend and or heavily invest in the business for at least one year.

And so I think a lot of times that goal versus no go decision might be better determined based on answering the question, am I truly ready? So it's just like, are you really ready for home ownership? I'm a huge proponent of home ownership. I'm a big advocate. I have a book called Your First Home, the smart way to get it and keep it. And another one of my books,

Million, The Money Coaches Guide, Your First Million. I talk about pathways to building wealth. And of course, property accumulation is one of those pathways. So I'm totally bullish. But I absolutely say, don't buy a house until you're ready, until you're cash ready, until you have proven yourself to be a good saver,

until you won't experience, you know, kind of payment shock if you're going from being a renter to an owner, until, again, your credit is intact. Your DTI, your debt to income ratio is in alignment with what it should be. And yes, until you have a nice cash reserve to deal with all of the unexpected and the stuff that's absolutely going to come after you close on that property. So by the same token, you should not just venture into entrepreneurship like, okay, I've, always wanted to do this, just let me go, let me start it. I have the money. Let me start. No, that's an improper way. You're not giving yourself the best shot at success because we already know that access to capital literally, that's the number one dilemma for, you know, entrepreneurs,

the whole country over. So what I would suggest is absolutely do your homework, absolutely leverage your skill set and your background and your network as well, depending on the type of business you want to start and whether or not it involves a product or service, etc. But really evaluate your readiness to succeed in entrepreneurship. And I think that that is probably one of the best things that people can do to figure out, okay, maybe this is not the year for me to start a business. Maybe I would be better served, pulling more resources into my retirement accounts or saving up money towards my entrepreneurial goals and understanding that it's not like I'm going to launch here in 2022. It might be a 2023 call, but along the way, I'm doing homework.

I'm monitoring my own personal credit. I'm a staff. I'm trying to get ready to be able to get business credit. And I'm doing things like benchmarking, you know, what my competitors are doing. So there you go. It's kind of like prepare yourself before you take that leap. It sounds like if you want to get started in business, you need to develop a runway situation, preferably at least a year for your personal and business expenses, probably in cash or something highly liquid. And that may come at the expense of the retirement accounts or these other types of things. And in addition to that, while you're building towards that position, you need to invest 500 to 1,000 hours,

learning about basics of business, reading books, networking, tending seminars, doing whatever you need to do to get ready to feel mentally ready as an entrepreneur as well. Is that a good way of kind of framing what you're saying? It absolutely is. And as a whole, another thing I would say to put a bow around this very quickly is, look, if you're an entrepreneur or you have an entrepreneurial mindset, if you're a property investor, you already are a risk taker. You're doing what, you know, most folks won't do. However, I believe in calculated risks, smart risks, judicious risks, not just bet the farm kind of risks. So that's the difference between somebody who's just gambling and just, you know, playing the odds and just going to, you know, kind of go at it willy-nilly versus somebody who's stacking the deck in their favor to make sure that they have all of the possible chances for success because. we know the numbers in terms of how many businesses go out of, you know, go under the first year, the first five years, et cetera. And you want to be in the latter category of businesses like mine

where, and I'm not toot my own horn here, but I'm just saying 19 years and going, you know, where's the wood? Let me knock on it here. And it's because, you know, we've been very blessed. We've done a lot of things right along the way. We've made a ton of mistakes too. but we absolutely take calculated risks and we don't bet the farm. I love it. Lynette, this has been a fantastic show. I really appreciate your time today. Can you tell us where we can find out more about you?

Sure. So the best place is my free financial advice site, Ask the Moneycoach.com. I have a video-based learning platform as well called Moneycoach University. And then, of course, I'm all on social on YouTube, Facebook, Twitter, LinkedIn, Instagram, et cetera. And everything is under the money coach or under my name, Lynette Calphani Cox. Lynette, this has been so much fun. Thank you so much for your time today. And we'll talk to you soon.

Good. Take care, guys. Thank you. All right. That was Lynette Calphani Cox answering your burning questions. I hope you had as much fun as we did. Scott, what did you think? That was great.

It was a fun discussion. She has really insightful answers. and I thought it was a, I learned a couple of things, especially my biggest tip of the day. I always learned something that I just had no idea about before. And it was the multiple ways to invest in I bonds between your personal name, your spouse's name, your business, and or your trust, or maybe multiple businesses or multiple trusts. So really interesting tidbit there that perhaps some folks will apply to their advantage. I'm definitely going to jump right into these I bonds.

and I bond education now because that makes it a lot more attractive. So, yeah, you're right. I always learned a little bit from every single show, and this episode was no exception. All right, Scott, should we get out of here? Let's do it. From episode 313 of the Bigger Pockets Money podcast, he is Scott Trench, and I am Indy Jensen saying, take off your socks, Mr. Fox.