BiggerPockets Money Podcast - 34: The Low-Stress, Surprisingly Simple Way to Pursue Financial Freedom with Andy Hill

Episode Date: August 20, 2018

On today's show we discuss the highest-probability way that a family can move toward financial independence—without stress and worry—while enjoying incremental freedoms along the way. We’ll also talk about all-cash real estate investing, where... Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 34, where we talk with Andy Hill from Marriage, Kids, and Money.com. I think the idea of financial independence really excites us because of the stress reduction factor. Obviously, anything could happen in our lives. Right now I have a job that I really enjoy, and it's something that is exciting to me. If I get to a point where things change there or there's a downsizing, but we're financially independent, I'm going to be in a good spot. It's time for a new American dream, one that doesn't involve working in a cubicle for 40 years,

barely scraping by. Whether you're looking to get your financial house in order, invest the money you already have, or discover new paths for wealth creation. You're in the right place. This show is for anyone who has money or wants more. This is the Bigger Pockets Money Podcast. How's it good, everybody? I'm Scott Trench.

I'm here with my co-host, Miss Mindy. How you doing today, Mindy? Scott, I'm having a fantastic day. How are you doing? I am doing great. You know, I really enjoyed today's guest in our conversation. I love how over the course of 30 plus episodes that we've recorded, the same basic advice keeps popping up over and over again.

There is no secret sauce to this financial freedom thing. It's spending less and saving more. And Andy Hill just continues to cement this thought with his interview. Yeah, I thought it was a great interview. The focus today is going to be on the, it's really a high probability way that a family can move towards financial independence with very limited stress and worry. I'm kind of an optimizer. I want the highest returns. Andy is opting for the surefire way, and it's still really, really fast for him. So really good perspective on that. And then what this approach has enabled him is he has,

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Andy, welcome to the Bigger Pockets Money Podcast. How's it going today? It's going great. Thanks so much for having me. Thanks for being here. Well, yeah, let's start from the beginning. What was, what's kind of your background with money and how did you kind of get, become interested in financial independence? Oh, well, you know, my wife and I, we got married in early 2010 and we were both making decent money together, but we really didn't know a lot about money. We made some good money, probably about little over six figures together, but we weren't that great at sort of managing it and holding onto it. So we had accumulated a good amount of debt, about $50,000 of debt. And once we started to talk about having children, some of these more adult conversations started to have.

happened in our lives. And we said, well, you know, we're not just living for ourselves anymore. Why don't we start planning for our children's future and the things that we could be doing together to really take our family to the next level. So that's kind of where we started early on in our marriage. And we started to make some big progress from there. In the beginning, it was just debt freedom. And then the concept of financial independence kind of came later in our lives. So what was that $50,000 in debt? Was that student loans, medical bills, consumer debt on credit cards? Yeah, a lot of it was my student loans. I decided to go back for an MBA program because I was making, I think, $28,000 a year.

And I'm like, well, man, this is just not enough money to live. I bought this house and I can't afford it. What I need to do is drop a bunch of money and go back to school and get an MBA so I can get a higher level of pay. And then the other portion of it was my wife had a car loan. So combined, when we came together in our marriage, we had about $50,000 together. and that was our starting of our relationship together. And so what was kind of that discussion like? What was the goal, I guess, that you kind of settled on besides debt reduction?

Were you like, oh, we're going to save this amount for college or buy real estate or what we were thinking with that? And who brought it up? So in the beginning, I got hooked on sort of the Dave Ramsey plan, right? I caught that total money makeover and read the book cover to cover. And I came out. I remember the day I was sitting on the chair, finished the book, closed it. my wife was coming in from a very stressful day at work and I caught her right at the door and I said, hey, honey, I've got a plan for our family's future. First things first, though, we have to sell your car.

And she just looked at me blankly like, dude, I had the worst day at work and you're telling me I need to sell this car that I love. And she just pretty much walked by me. And I was sort of in this fog of personal finance in my brain where I'm like, no, wait, no, this is a genius plan. And where are you going? Where are you going? Why isn't this working? And that's sort of how it started for us. But as the conversation started to go, we started to figure out ways or I started to figure out better ways to speak to my wife as opposed to the tactical side of things like get rid of debt, sell your car and more of the emotional side of things. Hey, sweetheart, I know we want to plan for our future. This is a great way to do it. Hey, honey, I know you don't like your job that much. This is a great way for you to be able to stay at home with the kids eventually. So when I learned to stop talking tactically and using the dollar signs and more emotionally,

that's kind of where things started to progress, not only in our financial journey, but in our marriage as well. So how long did it take to convince her that financial independence was the way to go? Well, let's just say it's keeping on going. We've been married for about eight years. Really, it's been a step process. In the beginning, you know, when we were able to reduce our debt, that helped us completely. in order to get to a point where she was able to stay at home and be part-time with the kids, part-time work, and then part-time stay-at-home mom. And eventually, after we limited all of our debt and then started to move towards our mortgage, that's when she was able to stay home completely with the kids.

So it's been about four years that she's been able to do that. And conversations around financial independence have spurred along that time. You know, I was really excited about this debt freedom track that we were on. And it just kind of kept going. And I said, well, what's next? And that's when I started to discover some, you know, conversations around financial independence and slowly brought her along in the process. So this is great.

This is like something that a lot of people can relate to, right? You have two income earners that are both earning around immediate income, right, to start this off. And your dream is at first just, hey, you can stay home with the kids and we can support the family with one income and still pay our bills and still pay down debt. And then it shifts to financial independence. So can you walk us like when did you, you know, how did that work? You started with 50K in debt and two incomes.

How did you get down to one debt or one income? And then how did you get down to paying off the debt on one income, I guess? Yeah. So what happened was we were able to pay off the debt, the student loans and the car loan. It took us about a year. Once we started to really focus, when you're making, we were making a little over 100. And we said, hey, let's put some major focus on this, live on about half and then pay this debt off.

And we were able to do that in a year. And after that, we just kind of kept that same focus of living on half. And we've been able to do that for the course of our marriage. So after we paid off the consumer debt, we said, well, hey, wouldn't it be great if we were able to pay off our mortgage with the same intensity. So over the next four years, we kept that same intensity and then paid off our mortgage just last fall. So within that process, we started to look at other ways to build our income outside of

our day jobs, knowing that she wasn't super excited to go back into the workforce and to what she was doing before. We said, well, what other things can we do to start bringing in passive income? That's when we got excited about financial independence, starting to save up for our first rental property, working on some side businesses that really brought us some excitement over the past couple of years. And that's really where we've been headed over the past couple of years. Awesome. So can you walk us through maybe the saving up for that first rental property? What kind of made you decide to buy a rental property and what made you save up to why did you decide on that as a route and yeah sure how did you do it absolutely yeah so we are still in the savings process right now so

we paid off our mortgage last fall and at that point we started to have about two thousand dollars extra and we said well what do we do with this extra money now you know what do we do to continue to go down this path and grow our wealth and head our family in the right direction and we did a lot of research listen to some great shows like bigger pockets and it got inspired that a lot of people are, yes, making some good money in the market with some with some extra money through passive index funds and things like that. But if you want to have some control and some skin in the game and try to create like almost like a little family business that you could do together with your wife and your kids down the road, real estate kind of got

us really excited. So I know a lot of people involve their kids in the business and finding a way to make that a almost like a, you know, a legacy for their family. So we got really excited about that. And it's been saving our extra money ever since then. Since last fall, we've got about $40,000, $50,000 right now. We're trying to weigh back and forth whether we want to go for a mortgage, leverage, or pay in cash. And since we're in a good market in Metro Detroit right here, where you can still actually get some decent rentals at a decent price, I think we're going to try to do the cash route. Okay. So I have a question, and I'm really glad you brought up the whole pay cash or get a mortgage, saving up for a cash.

purchase. Now, okay, first of all, the Detroit market has changed a lot, contrary to what Brandon and Josh always talks smack on the Bigger Pockets podcast about the Detroit market. It is changing. I'm hearing a lot of positive signs that Detroit is, when it changes, then it gets more expensive. What sort of price point are we looking at for purchasing a rental property? Yeah, we're looking in some good, we'll call them, like up-and-coming working working class neighborhoods and we're looking in between the $50,000 to $100,000 range for a call it a, you know, maybe a 1,200 square foot to 1500 square foot bungalow, something like that. And there are some up and coming areas not in the city of Detroit. The city of Detroit,

surprisingly, is extremely expensive. But there are some suburbs outside of Metro Detroit where a lot of the young people are moving to after college and they want to get a good place and some hip restaurants are starting to show up and then another restaurant will show up right around it. And we're trying to grab one of those in quarter four because I heard that's a good time to buy because nobody wants to look for a house when it's completely freezing in Metro Detroit.

So that's what we're thinking about doing. Okay, so I would like to hear your thoughts on why you are not taking out a home equity line of credit or a HELOC on your primary residence or otherwise leveraging the purchase of the new property so that you can get in faster. You have, did you say, $2,000 a month that you are saving? So if you're paying $50,000 for a property, it's going to take you 12 or 13 months to save that up. Now that's, I mean, that's a lot shorter than, you know, in my neck of the woods, it's like $300,000.

And to save that up, that's how many? 24 months. Oh, that's only 24 months? 2000 times 24 is 48,000. So they can squeeze an extra 2,000 in some point. No, no, no, for me to save up for 300,000, how much is that? Oh, that's going to take a long time. Yes. So it's not as easy for me. But there are a lot of people, eight years. I don't want to wait eight years to buy cash, to pay cash for a rental property. And I get that you're in a slightly less expensive market. Very jealous, although I've lived there in the winter. And I'm not that jealous.

Yeah. So why does your family choose to pay cash? Yeah, honestly, we've gone down this route of just complete debt freedom, and it feels really great, honestly. Every time we paid off a debt, whether it was the student loan or the car loan or our home mortgage, a massive amount of stress completely comes off of our shoulders. And that's just something that mathematics, I know it works in everybody's special way. It just doesn't work for Nicole and I. time we think about taking out additional debt, it kind of makes us nervous. So we are very excited about trying to do this cash route. And yeah, it might take a little longer, but honestly, we're in no hurry. And we're happy with the lives that we have right now. And as soon as we're

able to grab our first property, we're going to be really excited about it. Yes, the $2,000 comes each month, but, you know, there are things like bonuses at work or I get paid 26 times a year as opposed to the typical 24. So when I get those extra two paychecks, I throw that in the savings too. So on average, it's that $2,000, but there's this extra money that pops up every once in a while we throw in there.

So it's been accumulating faster, we'll say. Okay, I just wanted to ask that because I know that the listeners driving down the road, they're like, well, why doesn't he just get a mortgage? Yeah, it's easy to get a mortgage. Absolutely. Or I could take the equity out of my home. Our home is $400,000, you know, on Zillow right now.

Who knows what Zillow really means? But, you know, I could easily take some money out of there. But Nicole and I, it just feels like going backwards. And that's just the choice we've chosen. And there's nothing wrong with leveraging. I know a lot of people are very successful with doing that. It's just a different route for us. Ultimately, you have to be able to sleep at night.

And if you can't sleep with the stress of debt, what's the point of having like four rental properties that make you not sleep at night? Exactly. Okay, so moving on, you're going to buy a rental property in quarter four-ish of 2018. Have you started looking at the market yet? Yeah, so in the beginning, I was reading a lot of books and doing lots of searches on realtor.com and zillow.com and I started to do the analyization and the 1% rule and all these really exciting things.

And I was just over-exciting myself because I didn't have the money to do it yet. So I've taken a break over the past probably three to six months of not listening to real estate podcast, not reading real estate books because I get so excited about things that I want to make a jump on it right away. And I knew that I didn't have the cash. So over the past probably six months, I've paused on my learning or the individuals that are exciting me about making moves on it. But really all we've been doing is just throwing money in there and piling up the cash.

So that's really where we've been looking. but lately over the past, now coming into Q3 and Q4, I'm planning to meet with a real estate agent that knows the market that I'm very interested in and not just a real estate agent that's going to show us the nice homes that you want to live in, like somebody who's an investment-specific real estate agent that knows that market and can find the deals for us.

And that way they can be looking on our behalf while we're continuing to raise our children and work our day jobs. Okay, so one question, before we move on, where are you holding the money as you stockpilot? This was a question we asked a few weeks ago. Where should somebody put this money? Do you want to put it in the stock market? And then maybe there's a stock market crash and you feel bad about that. Or do you put it in a bank account and earn zero percent interest? What are you doing with your money? Right in the middle of what you just said, Mindy. So we're doing an ally savings account. We make about, I think it's 1.8% right now. So we had, you know, I have a PNC checking account and you make like 0.0015.

But then also I don't want to put it in the market because it's such a short period of time that who knows what's going to happen in the market over the next 12 to 18 months, let alone five years, depending on how long you are in, that my money could be half or even less depending on where it goes. So I wanted to have it in something where it's growing some interest, but easily accessible. Nice. I think that's a very smart way to do it. The way you're going about it is you're just accumulating cash bit by bit by bit. And you're being invested all in one lump sum in a very specific investment that you've already picked out. For that, you need a very low volatility place to hold your money. And it seems like you've made a smart choice to get the highest interest you can with the lowest volatility,

right? If you're going to save up 20 grand and invest in a leverage deal, now maybe you could say, okay, I can put that in a checking account and get no interest, or I could go ahead and put it in the stock market and who cares, the volatility risk is much lower in that time. So that makes perfect sense for that holding period. What I want to kind of point out also is what you've done over the last couple years, the last eight years of your marriage, is you've paid off a ton of debt. Your family has put your wife in a situation where she can stay home with the kids and you're still saving a huge chunk of money and you're going to invest in all cash. This is the highest probability way that I can think of of having a successful outcome.

Maybe you could argue there's a higher return on a leveraged real estate deal or not paying off your mortgage first and investing somewhere else. But what you're doing is almost certain to work, right? You could fail, but I can't think of a better way. I agree with you. I would say it's probably mathematically

or financially probably not the most aggressive move we could have done. I had a 3% mortgage that we paid off. Obviously, over that time period from 2013 to 2017, the market did a little bit better than 3%. But I cannot put a value on the stress that has come off my shoulders knowing that nobody can ever take away my home. It is completely paid off. And I love that fact. Yes, we still invested during that time frame. We maxed out our Roth, maxed art our 401k, did HSA. But we weren't investing outside of that in a brokerage account. And yeah, we could have made a lot more money.

I would not have changed anything. We're very happy with the decisions that we made and I'm pretty happy about it too. And since that worked so well for us, we want to rinse and repeat again, Scott, as you described. And since your strategy is so simple and so approachable, you know, it's just, I'm going to save a ton of money and buy a rental property. The lever in your financial position was where you went from spending nearly all of a six figure of a six figure income and accumulating $50,000 in debt to saving $2,000 a month on one income. So can you walk up, let's look like, I think we should go back to that and go into the specifics.

What was that first year or two like? What did you specifically cut to have your, be able to go down to one income and begin paying off that debt? Yeah, a lot of it was the transition from being single folks where you go out to dinner and you go to concerts and you go drinking and having fun with your buddies to, hey, I got to buckle down. I'm about to have a kid. And yeah, that's not the fun stuff you want to hear, but it's the reality.

When we would go out to dinner, we would spend, you know, a couple hundred bucks, you know, have some fun, drinks, things like that. Once you start dialing that back, it makes a huge difference. And we just ended up spending a lot more time together at home and creating some activities, especially when you had young kids. You don't want to go out. You don't want to go out anymore because you want to spend time with them. And if you try to take them to a restaurant, oh, bad idea. Don't do it. It's a waste of your money.

And your friends don't want you to do it either. So when they're young, obviously, and when they get a little older, it's a little easier. But when you become a parent, your priorities shift a little bit. Obviously, it's more less about you and more about we. And when we became excited about that and that actually helped to shift our budget. That's not to say that conversations with my wife, she's a self-proclaimed spender, and I'm definitely a self-proclaimed saver. The conversations together during that process weren't always easy.

And that required us to have a lot of conversations and a lot of conversations and a lot. of partnership throughout the process to make it all work. So what was your spending at when you were accumulating this $50,000 in debt? And what was it maybe a year after you finished a Dave Ramsey book? I would say, so let's say we were making probably around 100 together at the time. And we were probably spending around 100, you know. So after that, we said, hey, what can we do to live on 50? It took us a little while to live on 50%, you know, or cut it in half right there.

but over that period of time, we were able to scale things down and live on about 50,000. So that helped us to save, save 50, live on 50. And this was before you had kids. This was before we had kids. So we were able to pay off that consumer debt about four months before our daughter Zoe was born. And that was our goal to try to be debt free before our kids came into the world. Awesome. So I assume that's part of that $50,000 in spending was then also debt service.

Yes, absolutely. Absolutely. So it was saving up to have a proper emergency fund and then completely paying off the principle of the loans themselves. What I love about this is that, you know, cutting back on spending from that level, the details, you know, it sounds like there's some dinners out and fun stuff and things that were just maybe inefficient uses of time versus happiness versus long term goals or whatever that you just reprioritize to a certain degree. But also some probably smarter decisions overall. I don't know if you pay off a car loan or. and then not get a new car loan and that kind of that kind of thing. Yeah, we paid off her car and then we've had that car for 10 years now. So she had a 2008 Audi and it cost a lot of money to get an Audi back then, you know, or still does now.

Still does. Yeah, still does now. But we paid it off and it's still running now. It's only got 90,000 miles on it. We hope we take care of that thing. It lasts another 20 years. You know, I mean, they have some great German engineering. So absolutely.

So what was that transition like after? when you're about to have your kid out from having two income earners. Yeah. So how we transitioned it instead of going straight from, hey, debt free, we have a new child, sweetheart, your stay in home, we stepped to the process a little bit. We said, okay, what can we do now? Is there a way that you can go to your employer and say, hey, can I go part time? And since we had paid off the debt, we're like, all right, we have this ability to go in and ask these bold questions now because we're in a sort of a position of strength, right? So she went in and talked to her, employer. And before this, which you found out afterward, they have never granted a part-time working

situation to anybody at that company before. It's a pretty large company. But since she felt confident about it based on our financial situation, she went in and said, hey, I know that I've been a valuable employee. I would love the opportunity to work three days a week and then have two days to stay at home with my kids. Is that possible? And she got it. They loved working with her. And they arranged the situation where she was able to come into the office three days a week. And then during those two days, we had some great support from our moms that live locally here. And so we had the grandma babysitters. And the bond that they've developed with our children has been awesome. So it was a great way for us to step into part time and then move on from there. Okay. So I want to know what your wife was

doing and how long had she been there. And how did she structure that? Did she say she'd come in Monday, Wednesday, Friday, or did she do, like, front load the week or backload the week? So let's, I just threw like nine questions at you. What was she doing? And how long had she been there? She was a corporate recruiter for a marketing company. So they are a large company that needs to constantly recruit because they're a global, global large company.

So they have a on-staff recruiter. So she was one of the one of, I think, three or four there. So what she arranged with them was working Monday, Wednesday, Friday. and then she would be home Tuesday, Thursday. That way it was because there's always opportunities and new things popping up, if you're completely gone for half of the week, that might leave somebody who's interested in a job or somebody that they want to move quickly on in a difficult situation. So she figured, you know, Monday, Wednesday, Friday would be the best and that's the situation

that worked well for her employer. Did she present that to them when she said, hey, can I leave? Can I go part time? did she present this scenario? Because what I hear from a lot of people is, oh, I could never ask my boss to go part-time because they would never say yes. Well, but if you don't ask,

then they're automatically saying no. You have to ask these questions, and then maybe they say no, but you have more of a 50-50 shot if you actually ask the question. And if you present it, like, just going in, I want to go part-time. Well, no.

It's real easy to say no when you say that, but it sounds to me like she thought it through and said, okay, I would like to go part-time. time instead of cutting out everything, I'll come in every other day. So I'm still covered. You're only out one day. It's not a big deal. Right. Yeah. And she made the case for it too. You know, like you said, you don't just go and say, hey, I want to go part time. I had a kid. You want to go in there, tell them about, and what she did was tell them about the success that she's had in her job to date

and how she's a valuable employee. She's also, she'd also created a great relationship with their supervisor up to that point. Yes. And she did present it in a way, hey, here's how it could work. I think that she originally talked about front loading, but through conversations with her employer, they said, hey, this breakup would be a little easier this way. So as long as she was flexible in it and the conversations they had together, they just seemed to make it work out. And the flexibility of our parents at the same time also helped because they were in their 60s, you know, after work and things like that. So they wanted to jump back in and play the grandparent role.

So that all sort of serendipously worked out. Yeah. I think the key word that you use is flexible. If you're asking your employer for an alternative situation so that you can encompass child care, you need to be flexible. Being very rigid makes it very easy for them to say no, thank you. Right. Absolutely. Awesome.

So, I mean, it's a great story here. I mean, you start out with a bunch of debt. You get serious. You pay it off. You now have flexibility immediately come into your life. You take advantage of that. That improves your lifestyle. You start saving up.

And then you are now about to buy a. rental property, what's kind of like the next, what's kind of like the end game here for you? Yeah, I think the idea of financial independence really excites us because of the stress reduction factor. Obviously, anything could happen in our lives. Right now I have a job that I really enjoy and it's something that is exciting to me. If I get to a point where things change there or there's a downsizing, but we're financially independent, I'm going to be in a good spot, you know, no matter what. We're going to be able to take care of ourselves, take care of my family. And that's really what's always, always weighing on my heart or weighing in my head is that I've got three people to take care of in my family.

And it's an honor, but it's also very stressful sometimes. You know, whatever I do, it really affects the livelihood of my children and my wife. So I'm always conscious of overperforming at work, but then also trying to find other ways to diversify my income. so that I have some crutches just in case things fall down at work. And it's not necessarily if I just do a bad job at work. Anything could happen. The company could be in some financial stress and they got to let some people go. I get a new manager and he doesn't like me.

Anything could happen, right? So for us, for me, it's really a, I guess, a backup plan, a really strong backup plan. And that's why I really like financial independence. Nice. Well, I guess I'm asking is also is your plan to basically just buy? all cash rental properties or are you also investing in stocks or what's your what's your kind of plan to get there over the next few years yeah we we really like the cash rental property route so what we what we would hope to do over the next five years as an example is try to grab three

to five of these 50,000 to a hundred thousand dollar properties for cash run them out buy and hold long term and then you know if we get to a point where oh what nicole is now doing as she's gone from part time to no time as the the state home mom, which is a lot of time. I'll take that back. Sorry. And then she's she's ramped back into doing some part time work and a passion job that she has. She helps to go and organize people's homes. And she does this about 10 hours a week. So she's very good at it.

Medi just said she needs to come to her house. Yeah. Anytime we can go to Colorado. It would be great. But anyway, the whole point would be, hey, we've got a couple rental property. that are feeding us some income. Nicole's got a gig that keeps her happy and busy for whatever, 10 to 20 hours a week where she's making a little income.

And then, God forbid, I lose my position. I can do something like a podcast where I can make a little bit of money and have some fun with it too. So we're all set. And yeah, at this point, since we don't have a mortgage, we've been able to decrease our living expenses quite a bit. So it's really not that far-fetched that we would need, you know, three to five rental properties, you know, a job that where Nicole makes maybe $10,000 to $20,000 a

year. And then another one, we'd be set. We really only need about $60,000 to live. So obviously, health care is important. And we would want to have that. So we'd factor that in as well. Do you have any plans for health care? Because this is a question, probably my most common question that I get through emails when people contact me about the show in general is, can you please do a show about insurance? And I'm working on it. it's just there's big changes coming so it doesn't really do much good to do this great big show now and then everything changes in two or three months. Do you have any plans outside of employer-sponsored healthcare because I am in a passion project I get to work at bigger pockets?

There you go. And they have insured. So I don't have to think about this now. But there's a lot of people who do want to be financially independent, but they can't. They have pre-existing conditions. They have, you know, kids or they don't have kids yet and they're looking for kids. Kids are really expensive to have a baby, let alone, you know, all their other expenses. But so what is your insurance plan? Do you have any after? Honestly, right now, like I said, I'm happy with where I work. And right now, I'm planning to stay there as long as they'll let me. And their insurance is fantastic. So when we get to that point, if we get to that point where we need to look, I know that we need to have a good amount of money saved up. We're just planning like 20,000

a year just for having the same type of care that we have right now. I'm not even sure if that number is completely accurate, but from what I've heard that my company throws in to cover our family the way that they do, I would like to have that same type of care. So we're factoring that in. So for example, if we need to live on $60,000 a year for our just regular living expenses, I'm going to tack on another 20 just to make sure that we would be okay health insurance wise. Okay. Yeah. And you know what, quite frankly, my husband was a W-2 employee and then he went to 1099 contracting and had to pay his own insurance. And it would $20,000 is a pretty good estimate, although that was for the garbage level, I think it was called, the officially. Oh, okay.

The, the Obama Care Exchange, it was the garbage level plan. Is that the sales term they used? Yeah, that's what it felt like. Awesome. All right. So maybe a 30 is better, huh? So you may need a little bit more. But yeah, I'm also hoping for a big change.

So we'll see. I hope so too. Yeah, I mean, that's if you're doing by the 5% rule or the percent rule for early retirement, you know, 20 grand means you have to build $500,000 in excess wealth in order to retire just to cover your health insurance, right, which is pretty significant amount of spending. So this is a huge problem, one that we kind of need to address in a future episode. So we're hopefully, and like, again, some of us, at least me and Mindy are cheating because we work at bigger pockets and bigger pocket space for our health care. So something that we have not fleshed out and considered yet in the future. So absolutely. Well, as you said, Mindy, you got the passion job and you're able to, uh, you get the insurance. Yes. Yes. It's honestly, I could just

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Because that's the big thing that I think, like the two kind of limiting factors in order to move toward financial dependence about having children are one, the expense of caring for them. Either a parent has to stay with them, you have to pay someone to watch them. And then also the maybe limited flexibility in moving and jobs and those types of things. Yeah, absolutely. Oh, go ahead. This is the number two question that I get. Number one is insurance and number two is how do families do this? So excellent question, Scott. Sorry, Andy, go on.

That's okay. So this would be essentially the exact opposite of what Nicole and I did. And I have some conversations with families who either call in to our show or work with me for money coaching. And they're in that situation where they either want to figure out how that one of the parents could stay at home to watch the kids or how. how are they going to afford the equivalent of somebody watching the kids while they both work? And a lot of people who are getting to their late 20s or 30s, they're starting to make a lot of money.

And they say, well, man, it'd be really difficult for us to get rid of one of those incomes. So in order to start affording it, I think the first thing that I always ask people to do or I have conversations with people is, are you currently tracking your spending whatsoever? I mean, just having that gut check to see where it goes. I think both of you guys are fans of Mint and I am too. We live by that. We have for the past, I think six or seven years. We've got all of our information in Mint. And it's so helpful to look and see where we're spending, where the gaps are.

And that's the first number one thing you got to do. And I'll just put out, the most frustrating thing for me in these conversations is typically the people I'm talking to this about in like Denver, for example. It's a couple maybe and their household income is over-due. 200k. And they're like, I can't do it. I can't save anything. I can only save like 10 grand a year. Child care is too expensive. That's it. And I'm like 200k a year, you know, like 80K or 160k a year, you know, between two people. Like they just don't track their spending and they just throw their hands up in despair. So I think that that's, yes, that's the correct first observation. But it's very

frustrating when people just like, oh, I can't do it. I haven't bothered to check any of this or track anything, but it can't be done. And sorry. I'm a little bit of a rampage there. But go ahead. I hear you. Yes. Well, and what I find is that when these people start tracking, they're spending, you know, the people who are truly serious about it because there are lots of people who like to just complain.

Oh, I can never do that. And then they move on. The people who are truly serious about it, once they start tracking their spending, they're like, oh, I didn't know I was spending that much on insert item here. So everybody we talked to says the same thing. Tracking your spending is the number one thing that you should do when you want to start down this path. where is your spending going?

How much are you spending on all these little things? And does your spending reflect your values? Do you really want to spend that much money at the grocery store at the restaurant on clothes on whatever? It's so eye-opening, as you're saying, Mindy, like once you put it down, actually, that's the most revealing thing. And this whole personal finance journey, financial independence, financial freedom, whatever you want to call it, the most important thing and the most eye-opening thing is once you start putting your numbers down, and you realize what you're spending on. That was out of everything that we've done in our journey together, that was the most revealing thing.

And it helped us make a big difference. Because if you don't know what you're spending, everybody knows what they earn, right? You say, oh, I earned this. This is my salary. Not a lot of people know what they spend. So when you look at it, it's truly eye-opening. That's why this is the big lever in everyone's, you know, for most people listening, is most people spend a lifetime and a lot of money on education and a lot of time and effort.

and thought optimizing their salary. So there's not often a lot of chance to increase your income quite as much as there is on the expense front where people haven't put any time in. But anyways, we're getting into the details. We're getting too far off of this tangent of just how great track of your spending is. What specifically can parents do once they've tracked their spending and made some adjustments where they can in the area of childcare? So specifically, once you start looking at your spending and you get an idea of where those

trouble spots are if you really want to be a parent and be able to continue working because some people want to have both. And that is okay. There's nothing wrong with keeping your career going, especially as a woman, which is really important. And also being a mom. And I know a ton of moms that do this that say, I work with some and they come up to be. They're like, that's really nice that your wife does that. But man, I would tear my, tear my eyes out if I had to stay at home with my kids all day. And there's nothing wrong with that. I totally respect that. So for those folks, what they have to do in order to take care of the daycare as well is really analyze that spending and see where can you pull back in order to pull in another, whatever, 30, 40K, depending on where you live to cover your annual coverage for what your kids need. And I know a lot of people, even the individuals that have kids that are off for the summer, even if you're working, it's not the typical preschool or daycare.

sometimes the summer is in a complete the open season. You've got to figure it out. Things like camps. They can be great for education. They can also be pricey too. So being able to factor those things in and look at the areas of your budget that you could say, well, where can we pull back in order to have both? If I want to be working and have the daycare, where can I pull back?

Some of those things might be grocery budgets. It's a great one to hack. You know, we were, Nicole and I were spending. I got a typical grocery store. I don't know if you guys have Kroger where you are, but typical grocery store, we were spending about $1,000 a month. And once we really started to look at this,

yeah, just for two people and some, you know, some little toddler guys, once we really started to look at it and really decide, hey, what can we do to bring this down? Because at this point, she was full on stay-at-home mom. We really need to kind of pull things back a little bit. We said, okay, what can we do? We started shopping at Aldi.

We started shopping weekly, and we started with a list. And we literally cut that thing down to $600 a month. And that is a gigantic savings. I mean, that's like a small little salary there by saving that much on groceries. Same food. It's a great store. You just don't have as many frills.

Things like that you can really cut back on. So the point that, you know, one of the points I'm picking up here is we're not going into the specifics of child care expenses, but perhaps what parents do, perhaps my, my friends who are making 200K a year who can't seem to save anything. What they're doing is they're spending a lot of money on child care. And then they're like, well, that's my problem. So I'm not even going to bother to look at my health, my grocery budget. I'm not even going to bother to look here because this is where my really big expenses,

so this $400, $400 a month, my grocery budget is not actually making it a difference. So you're saying, hey, these things are areas to improve. But first of all, is that a good takeaway from? Yeah, absolutely. I mean, yeah, like you said, there's ways to cut back in order to get the other. It's essentially, you know, whatever you want to afford, you can figure out how to afford it, based on removing some other things in your budget. So, yeah, absolutely.

There's ways to do it. You just have to be flexible. Let me walk through a thought here on child care with, it seems to me that over the people I've interviewed over the course of the last few months and talk to and kind of hash out this problem and thought through it, that each set of parents has a unique way of kind of handling the child care situation

with one extreme being, I'm going to hire a nanny or put the both in daycare and pay full price while this person, while one spouse works. Right. And that seems to be the case where both spouses earn a fairly high income, upper middle class income, where one is earning lower than that, then it seems like, hey, now staying home or finding out some creative ways or part time, that's when the math begins to move more in that in favor of that, right?

Absolutely. I guess for our friends that are in the higher income areas, they're going to need. to like what's what's a hack for them like well yeah those passes are working both are full time have to have the kids watch during the day no parents in town what do they do oh yeah so no parents in town absolutely yeah i mean if you don't have family in town and i know a lot of people do they'll they'll live in one area and then they'll move to colorado move to dc or something like that where they don't have a lot of you know network what you can do is connect with other people who are in your situation maybe with small children and figure out some sort of uh

share program. You don't have to actually completely have to pay or shell out all this money. Maybe you want to go out on the weekend sometimes for date night. And maybe your neighbor wants to be able to, you know, help you out by watching some of the kids and then have some sort of exchange. So is there a way that you don't have to shell out the money, but you're actually creating some sort of community system where you are helping out. It's essentially, you know, the community raises the children, right? So what way can you make connections in town and then think creatively, it doesn't always have to be out shelling out your money. What can you do to find a way to almost make a community out of it and share the resources and then be able to take care of the children

and not pay as much? So that's something that I've heard people do. I will say that I joined a mom's group when my oldest daughter was born. I was a stay-at-home mom. I had always planned on being a stay-at-home mom. It was what I wanted, like you said, we're not going to judge people who want to work versus people who want to stay at home. That's not what this argument is about. But I did want to stay at home. I joined a mom's group because I was new in the area. We moved when my daughter was three weeks old. Excellent time to move and pack up is when you're three weeks postpartum. Totally great idea. But I joined this group. I met a lot of people who had very similar mindset as I did. And a lot of them, I think all but two, it was their first child.

So, and we were all stay-at-home moms. So we could connect and share with each other. We shared a bunch of everything. We shared meals together. We shared like when we started having second babies, we all got together and did, you know, the meal sharing program. But we also did a lot of babysitting. Oh, I would like to go to the grocery store without my kid. I can bring her over to Heidi's house because I like Heidi. I know her mothering skills and I know she'll do a good job. Now, not everybody was a stay-at-home mom. So I watched Stephanie's kids. I watched, who else's kids did I watch? I think I watched Laura's kids a couple of times. They would come over and we would just play and it was very easy. We were on the same schedule and we had the same parenting skills and same parenting ideas because I had gotten to know

them during this mom's group that we met at a birthing center. So, you know, finding a group of similar people is really important when you're a new parent. And, you know, you can really help each other out. And I think it's important that you know their parenting style because there are some parents who give their children soda in their bottles. And that's not the type of mother that I am. So, you know, make sure that you have the same parenting styles and the same like child-rearing ideas. Absolutely. Yeah. No, our, one of my, a great example of that is my neighbor. She has stayed at home with her children up to a point and then her sister has just had a child about a couple years ago. And instead of working with, you know, a daycare or something like that, she said,

hey, would you mind watching my child during the day and I will pay you? And so it's almost like a, it's an opportunity to obviously not shell out all the money for daycare. And she's with a family member too. So obviously depends on if you have family members near you or somebody like you said, Mindy that at least has the same values that you do, you might be able to figure out a situation that works. Yeah, I wonder if one of my, again, I keep referring to this one couple of my head that it's in particular just seems so in denial of their ability to save. And I'm wondering also if a part of it is that this couple lives in a neighborhood

where most families are in the same situation. So they all, maybe everyone in the neighborhood's earning between like $180,000 and $250,000 in household income. They all have mortgages that stretch from their financial limits, drive nice cars. put their kids in daycare, can't save a thing. Now, the concept of sharing daycare or forming a mom's club or doing whatever is just not in your head because it's not culturally what the people that you're associating with are doing. And you're exposing yourself to a community or going a little out of your way to find people that kind of share your financial values and can cut these expenses over time

or moving in general out of that area and out of that culture down the block, you know, to another block that has it. Maybe that's where you can start to, these ideas start to become realistic instead of, oh, I could never do that. Well, I think, I think, like you said, Scott, I think they have to really want it. Are they, are they delaying having kids because of this situation? No, they have kids. Oh, they do. But they just saying, I can't afford, can't afford the daycare. Well, they're saying, they afford the daycare. There's, I can't afford to move towards Fai. That's the problem, right? I see. Well, it's all about, it's all about passion, right? What are you most interested in. They must not be extremely passionate about reaching financial independence

then because they would figure out a way. There are ways. I mean, this whole show is dedicated to hacking ways to figure out financial independence. That's it. That's it. What you just said it. That's it. Yeah. So one more question I want to ask you about people who say, oh, I can't do that. I can't do that. Kind of a different but same scenario. My sister has always said, oh, I love my job. I don't want to quit. Well, okay, that's great. But then all of a sudden, this year, she decided that maybe she doesn't love her job so much. She can't quit because she hasn't moved for, moved towards it. How do you encourage people to look at FI? Is this a good question at all? Well, yeah, what you're asking is this person wasn't carrying off FI, didn't make correct choices,

and now it's stuck. How do you get people to choose to pursue FI before they get stuck rather than after they get stuck, right? What I would say to that is the same conversations that I had with my wife originally, as opposed to talking about, hey, you need to amass all of this money or get all these homes or whatever in order to cover yourself with financial independence. Think about the emotional side of things. You might have to future project yourself in a situation. How would it feel is if one day you decided you hated your job?

Or if you, if one day new management came in and said, you're not worthy of being here anymore. You're gone. It's almost putting yourself in that situation and emotionally feeling how that would feel. And then maybe that jolts you into the situation where, hey, maybe I need to be, instead of living for today, I need to start planning for tomorrow and taking care of myself. So sometimes when I get all excited, I think all three of us think about the numbers and think about the steps and the goals and things like that. but I know for a lot of people that I speak to, especially my wife, it has to be more along the lines of the emotional side in order to motivate people. I think that's true.

And I think there's also a part of it that come, you know, where no matter how you do it, if you're trying to convince someone who's cold to the idea about FI, what you're trying to do is say, here's a great another way. You're going to have all these options in life. It's going to be incredible. You're going to be just as happy and things are going to be wonderful. And you're going to have all this freedom and choice and control over your day. what you come off what they hear is not that what they hear is you're an idiot doing it completely wrong spending all your money on stupid pointless junk and i'm living in a far superior manner to you you should do what i'm doing right and that's just how you come off like you just do it's just we can get

away with it because we have a podcast and you our friendly listeners have chosen to listen to us you know because you like hearing us talk about this stuff but you can't do that in person conversation like I can't do that in conversation with my friends or family because that's how I come off. They don't want to hear about it. And they don't want my opinion on how to live their life. And how you're saying that is honestly like a lot of the conversations that my wife and I have two together. When I say, hey, sweetheart, let's spend less at the grocery store. What she hears is sometimes I want you to not eat as well or go to a grocery store that's not as convenient. What really I'm trying to say is I want to spend less so that you can stay home with the kids and make this all work out. It's all about how it comes out of your mouth because I think we get really excited about things and we don't want to sound showboaty or not showboaty, but just like we're, you know, we're saying, hey, it's a better way.

But I think it's all about how it comes out of our mouth. So I think once you tie in the emotions or the final destination to what it is, I think more people would be apt to listen. I hope. I at least hope. Yes. So is there anything else that you want to cover before we move on to the famous floor here? I think we've been great. Thank you very much for the conversation, Scott.

Hey, everyone, Rob here. I'm head of product and engineering for bigger pockets. I'm here to make an exciting announcement. We just released our new mobile app. While you finished listening, go download it. You can participate on our forms, read the blog, receive keyword alerts, and more. Go download it now, and you'll thank me later.

Awesome. Well, Mindy, should we move to the Famous Four? Yes, we should. These are the Famous Four questions. They are the same questions that we ask. ask of every guest, there's five, but we call it the famous for for no reason whatsoever. What is your favorite finance book? I would say the total money makeover really helped Nicole and I out in the beginning. That's Dave Ramsey.

But one that really kind of moved me forward that's kind of outside of the personal finance realm is called the slight edge by Jeff Olson. It's all about making small incremental changes in your life, both with your health, your family, and your wealth in order to make a major. difference down the road. I like it because it's almost like investing. When you start investing or you start planning, you start saving, it just seems so small like you're not making any difference or change whatsoever. But those small incremental positive things you're doing in life can make a monumental difference down the road. And that's why I really like the book. It's a quick read and very motivating. It's one of those ones where you've got like the pad of paper right next to the book and you're writing down all these things that you're going to start working on. And I just remember

myself on a plane writing down all these notes and getting really excited about the theme of the book. Nice. That reminds me of another book that's with a similar theme called Compound Effect by Darren Hardy. It was mentioned a couple of shows. But I love that concept of just, that's another problem with what we're just discussing before as well with the talking to other people. Like when you say, hey, I want to move toward financial freedom, they see you're living a way below your means, a lifestyle that I don't want. And by the time that you see the rewards of that, you're buying a $50,000 to $100,000 rental property plopping down all of that in cash. So you go from not being able to understand what you're doing to being totally

unrelatable to them and the amount of money that you have. So at no point can they relate to your situation. Yeah. Yeah, well, I mean, again, you start off with the small steps and hopefully you make, make it to a good spot because it works. Everything else where you say, hey, it's all going to happen right away and you're going to become rich. It's just not real.

Yep. All right, what was your biggest money mistake? I would say I bought my wife's engagement ring with my student loans. What? Oh, wow. What? Yeah, yeah. So before we got together and before I really knew much about money, I had access to student loans.

And you can kind of spend whatever you want with your student loans. And I was in love with this woman. And I didn't want to wait. And so I bought a very expensive engagement ring. with my student loans so that when we got married, she was actually helping to pay down those loans. So essentially she was paying off her own ring on her finger. So that would probably be my biggest money mistake. Wow.

It sounds like you were able to subsidize the cost of the- There you go. There you go leveraging, right? My friend, there you go. I disagree. Best investment I've ever made. Or that she helped me to make. I disagree. That is the biggest money mistake I have ever heard in 34 episodes.

Yay. Then I, then I. Congratulations, Andy. Wow. Okay. I will not harp on that. I think it's the smallest money mistake I've heard at 34 episodes. I think it's a good investment.

Wow. I will say that I don't know how much engagement rings cost because I've been married for a thousand years and I didn't buy my own ring. Yeah. So I don't know. But okay. Wow. What's your best advice for people who are just starting out? Don't buy your wife's engagement ring with student loans.

Besides that. Besides that. Besides that. I mean, we talked about utilizing something like mint right in the beginning. But overall, I think we're in a time that's really exciting. I would just say use fintech as your friend. There are so many apps out there, so many really either cheap or free apps that will help you move towards building your wealth, tracking your finances, growing your investments, and I don't think that's talked about enough where, yes, you've got to have the

motivation and the desire and the want to, you know, to make a difference. But there are these tools out there that once you understand them, and it's super easy to understand them, they just help you move miles ahead. You know, we talked about Mint. I love Tiller, you know, personal capital, some of these ones that are great that help you track your finances. And then there's other ones like a legacy app like Tomorrow that help you prepare your will. There's just, it's all so, it's exciting right now, FinTech. You just got to look into it and then take advantage of fintech and automation as well as your friends. And fintech, by the way, for listeners, is financial technology. It's just an abbreviation for that. And it's all these different things that he's

talking about. And what I love about that is fintech is really exacerbating income inequality and wealth inequality in this country because it makes it so easy. Now, anybody can do this. Anybody can go and set up a mint account and track their spending it and get increasingly incredible information right at their fingertips. Anybody can go set up an account with one of these low interest or free trading apps, low fee, you know, funds. I go on Robin Hood, an app to trade my stocks for free, and I buy low-cost Vanguard index funds. I track it all for free. You know, I have mint that I can integrate all my investments with and manage everything all in one place. And it makes, it gives me an enormous compounding advantage over my friends, this couple that are unable to, that don't, even track any of their money and manage their whole thing through like a fidelity account through work and that's their old and like maybe a bank and that's their entire interaction with fintech. It's just an insurmountable advantage that's leading to really gross inequalities, I think, for people take advantage of it. It makes it really easy for you. So I think it's a great.

Free and or are completely inexpensive too. All right. What is your favorite joke to tell at parties? Well, I'll be honest with you, Scott. I did not have a bunch in my repertoire, so I had to do a little bit googling and I practiced them with my wife and my kids last night. So this is the one that rose to the surface. All right, you ready? I'm ready. Okay. So little Johnny lives in this neighborhood, right? And there's a couple other kids that's neighborhood that don't really treat him that nicely. They think he's dumb. They think he's stupid. And they like to play one specific joke on him a lot. So they offer him a dime or a nickel. And, And little Johnny always takes the nickel.

And the kids think it's so funny. They think he's dumb. And then one day, one of the neighbors pops up and comes up to little Johnny and says, Johnny, don't you know that those kids are making fun of you? And don't you know that a dime is more expensive than a nickel, even though the nickel is bigger? And Johnny looks at the neighbor and gets a big grin on his face and says, yeah, I know that a nickel is less than a dime. But if I took the dime, then they'd stop giving me money. So far, I've got 10 bucks already.

Nice. Well, I really appreciate your two cents on that joke. Oh, I don't appreciate yours, Scott. Okay, Andy, where can people find out more about you? Well, I have a weekly podcast called Marriage, Kids, and Money. I'm on all major podcast players, but the best place to get a hold of me is MarriageKidsandMoney.com. But for the Bigger Pockets Money Crew, I have a... a guide that I'd like to give for free called the Young Family Wealth Playbook. It is a seven-step guide that helps people create legacy wealth for their family. And it's based on all of the

interviews that I've done on the podcast over the past year with millionaire entrepreneurs, personal finance experts, and financially independent rock stars like yourselves. So check it out at marriagekidsandmoney.com slash BP. That's marriagekidsandmoney.com slash BP. And we will put a link to that in our show notes, which can be found at biggerpockets.com slash money show 34. That's biggerpockets.com slash money show three, four. And thank you very much for that seven step guide to help families create legacy wealth. Like I said, that's the number two question that I get is how can families, you know, start down this path to financial independence and creating legacy wealth is a

really big part of that. Excellent. Happy to help. Awesome. Well, Andy, thank you so much for your time today. This was a really fun episode and I've learned a lot from you. Yeah, this was great. Thank you. It was a blast being here. Okay. So that was Andy Hill from Marriage, Kids and Money. We will see you in a couple of weeks actually at FinCon. Absolutely. I'm looking forward to it. I am too. Both of us will be there this year along with, is anybody else coming from Bigger Pockets? Connor and Craig, I think are both coming. Oh, yeah, we'll be representing at FinCon this year. All right. Okay, well, for the Bigger Pockets Money show, we are out of here. All right.

That was Andy from MarriageKidsandmoney.com and the Marriage Kids and Money podcast. That was a great episode. What did you think, Mindy? That was fantastic. And like I said in the beginning, there's nothing magical about financial freedom. It is simply not spending as much money as you're earning. It's saving the money that you aren't spending and investing it. And Andy is going to do this and he's going to become financially independent in just a few years.

and real estate is going to play a huge part in it, but also just not spending so much money, you know, saving, cutting your expenses and specifically tracking your spending. Like, what is the number one thing that you recommend people do when they want to start down the financial independence path? Track your spending. And that just, that keeps being the number one thing that people say over and over and over again. Yeah.

And I think that the people who are not tracking their spending are just simply in denial of their ability to move toward financial independence. They're, oh, I can't possibly do anything. Well, no, if you just track your spending, the opportunities to move faster will magically materialize and you'll be amazed at your progress. But I really thought that Andy's story also was great because it's relatable. Both he and his wife earned a combined household income of close to six figures eight years ago, right? This is not an amazing amount of money.

This is very achievable. It's two median income or median incomes that many people can work their way into over the course of two or three years with even just like a trade or any type of profession with a college degree. So this is a repeatable path, I think, for many people to follow is by listening to the story and moving towards it. And it's so simple. And he makes it sound so easy. Well, and like the pops said, Mr. and Mrs. Planting Our Penny said a couple of episodes ago, he had a job in sales. He had a $35,000 check one month. I don't know about you, but it's a $1,000. I don't know about you, but that's, I don't make that in a month here at bigger pockets. Maybe you do. Maybe the president just

makes $35,000 a month. Nope. Not no request. That's huge. And sales absolutely is something that anybody can do. You just sell something to somebody who needs it. I mean, there's making these, these high dollar figures is not just for people who have PhDs. It's not just for people who have a computer background. It's not for these tech jobs. It's, there's other things you can do and still make these high dollar figures. Absolutely. And you don't have to spend $100,000 a year. I live off of like 30, 35. Absolutely. And everybody's got their mark. But if you have two income earners that are both earning median incomes or above, I mean, there's a really big opportunity to make a tremendous amount of progress in your savings, no matter where you are in the country, as long as you're able to

command that median income per person. Right. Well, should we get out of here, Mindy? We should, Scott. Thank you so much for today from episode 34 of the Bigger Pockets Money podcast, where we talk with Andy Hill from marriage, kids and money.com. This is Mindy Jensen over and out.