BiggerPockets Money Podcast - 363: Finance Friday: Savings Stuck At Zero? Here’s How to Grow Your Bank Account

Episode Date: December 16, 2022

Once you know how to save money, you can start stacking those savings to buy real estate and businesses or invest in long-term wealth-building investment accounts. But, without a steady stream of savings coming in, you're treading water, and one emergency expense could completely blow you off course. In a high-cost-of-living area like Washington, DC., this can seem even harder as rent, gas, and going out prices are far above the national average. But, there are some surefire ways to save (and make) more every month. On this Finance Friday episode, we talk to Richard, a government tech worker who makes a great salary but could potentially be bringing in much more. Richard’s dream of being the President naturally led him to real estate investing, and now he’s focused on building bigger, stronger, and smarter income streams so he has ultimate time freedom (and a high net worth) in the next few decades. But even with his tech salary, Richard struggles to save every month, with random expenses knocking him out as soon as they arise. Mindy and Scott go through Richard’s income and expenses as well as his debts, much of which are forgivable student loans. Richard debates whether sticking with his perk-heavy government job is worth the pay difference he could gain in the private sector. And whether or not buying cash-flowing businesses is a smart move, especially for someone without much savings. If you’ve struggled to boost your bank account, this episode may hit close to home! In This Episode We Cover Public student loan forgiveness and the “trap” many government workers find themselves in Emergency funds, safety reserves, and how to build one from scratch When to change jobs for more pay vs. when to keep big benefits, but a lower salary How to budget and the better way to track your expenses if you struggle to save Buying a business and what it takes for first-time entrepreneurs Creating a vivid vision of what your life, job, and business will look like in five to ten years And So Much More! Links from the Show Find an Investor-Friendly Real Estate Agent BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Mindy's Twitter Scott's Instagram Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Subscribe to The “On The Market” YouTube Channel Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets Check Out Mindy’s 2022 Live Spending Tracker and Budget Click here to check the full show notes: https://www.biggerpockets.com/blog/money-363 Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Check out our sponsor page! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast, Finance Friday edition, where we interview Richard and talk about increasing income, the pros and cons of the public service student loan forgiveness plan and investing from a position of strength. For me, it's weighing out the nice, happy lifestyle that I have, working from home 100%, get a lot of time off, spend a lot of time with my wife and my pets. You know, it's very happy on this side and I still have something. I still have a good, in my opinion, I can still save about 20% of my income as long as I'm not paying off the credit card. But you're right. You know, I do think about that often leaving the government for the private sector. Hello, hello, hello. My name is Mindy Jensen and with me as always is my big thinking co-host Scott Trench.

Always another scalable opportunity to chat with you about money today, Mindy. 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, buy businesses, become president, or live in a castle. We'll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams. Scott, I'm super excited to talk to Richard today

because he has a lot of opportunity ahead of him. He's also got some of the financial. He's also got some pretty big, let's see, challenges ahead and some things to think about. Yeah, I think what's awesome about the show today is this, as Richard has some pretty clear dreams and some pretty clear goals in his life that he wants to achieve. And what he's missing is a foundation that is suitable from which to pursue those goals in a way that is responsible and high probability. and that's what he needs to pour over the next couple of years, and I hope that the advice we gave him is motivating in that,

yes, you should and can go after these dreams. You can't go after them now, responsibly in some ways, but within one, two, three, four years, they should, meaningful steps towards those dreams should be realistic and probable. Absolutely. Before we bring in Richard, I need to tell you that the contents of this podcast are informational in nature and are not legal or tax advice,

and neither Scott nor I nor Bigger Pockets is engaged in the provision, of legal, tax, or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal tax and financial implications of any financial decision you contemplate. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing.

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What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. so every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at monarch.com code pockets. I love Matt, said no one ever.

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

and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. Richard is newly married and his wife just started her job this week. They live in a high cost of living area and are looking for help with budgeting, saving and investing. Richard, welcome to the Bigger Pockets Money podcast.

I'm super excited to talk to you today. Howdy. I'm very happy to be here. Let's jump into your numbers. I see income at 4479 hitting your bank account. as your monthly net with an additional income of $240 from strength training class and $80 a month as personal training for a total of $47.99. And as we just mentioned, that'll be going up once your wife starts receiving a steady paycheck.

I have monthly expenses, a total of $3,700 a month, which really isn't so bad since you're in such a high cost of living area. The only expense I want to call out is your rent of 2279. Again, that's the high cost of living area. I don't know what you could do to lower that, but that's really the only expense I see that jumps out as like, wow, this is a lot. We have debts of student loans, $108,000 at interest rates between 3.4% and 7%. currently in the COVID forbearance.

So you're paying $0 on those right now. Correct. I see a car loan of $15,000 at 3.75%. And you had a terrible situation in the past with an old car. It died and you had to roll in $9,000 from that car loan into this one. So you're essentially paying off two cars when you only have one. That kind of stinks, but it is what it is. credit card at zero. Yay! You just paid that off. Congratulations. And a TSP loan of $1,100 and you're paying off

$200 byweekly. The original loan amount was $5,000 so you could pay off the credit card earlier. I think that makes sense because this has a much lower interest rate than those ridiculous credit card loans. Total debt is $125,000 with, of course, the bulk of that being the student loans, which will at some point come back due. Right. So investments, I show approximately $22,000 in your TSP. So Richard, how can we help you today? Can you give us a brief overview of your money story and then talk about some of your pain points? I think my money story really starts right around the end of college. I was thinking about what I wanted to do. I was graduating with business management degree. And I thought about what I like to do. And long story short, I was

trying to find out what kind of leadership position I would want one day. And I think pretty lofty goals. And I know it sounds silly, but I thought maybe I want to be president of the United States. Let's go with that, right? That one single thought led, you know, five years ago led me to where I'm at now in Washington, D.C., or at least the metro area. And it led me to search what presidents are like. And then I found out most of them were millionaires. And I found a lot of them became millionaires because of real estate. And that led into the great rabbit hole that I think we're all familiar with of books, podcasts, YouTubers, and now we're about five years down the line. And I've read a lot, watched a lot, listened a lot. Awesome. And how, can you walk us to

through any of the money buildup? You know, it sounds like mostly it's just been, there's been, most of your position is on these student loans, and then there's a little bit of money in the TSP. Correct. Any insight into your savings or investing approaches? Right. I took me a little while to realize,

ETFs, index funds were the way to go. Of course, when Robert Hood came out at first, everyone was all about it. I was one of those guys. spent a little bit of time trading but then quickly realized that just long-term investing was the right idea but once I got my full-time job here in the Washington DC area I just set my contribution to the Roth TSP and matching and the match rate which is at 5% which isn't great isn't bad but I said it there and don't touch it ever other than that TSP loan

which really helped me out get rid of high interest credit card debt and put that into the TSP, which is a 1% interest and pays back to me anyways, not to a bank or anything. As Mindy mentioned earlier, my car, I had a truck back when I lived in Texas, and it was a bad truck. I do not buy Ford's anymore. And it had about $9,000 on it, and I had to wrap that up after it died into a loan for Toyota Camry. So that makes up the rest, or more debt. I think the student loans, that is, you know, troublesome, but it's also one of the reasons why I got into the federal government,

the public service, because we do have really great forgiveness on that after a certain amount of payments. And I actually looked out on how that forgiveness is going to work out for me, mainly because all these zero dollar payments still count towards my qualified payments. But that's kind of where, that's kind of the story right now. I had a car loan. I got my student, my student debt. I've got my full-time job working.

And so far I've just been putting towards my TSP Roth. That's really the only investments that I've made. And the main trouble, my main pain points is building up the savings. and keeping it. You know, I think I'm a pretty disciplined person, but for the past several years, it's been hard to keep that, hold on to it. Something usually happens, something big,

or something that seems big, and it disappears. It flows away, then I'm back to zero. You get a little bit of that shame, sort of, that you feel like, man, you know, I had all that money and I let it go, and then you kind of get into some comfort spending, and now you're back in credit card debt. And so, this is just cycle.

But now I'm back to zero. So that's why I wanted to talk to you all. Awesome. Well, Richard, what do you do for living? What is your job? My official title is Operations Research Analyst. What I'm really doing is data science. Lots of computer programming type stuff.

Python, SQL, data management, predictive analyses, things like that. Okay, great. And you said you make $106,000 a year? Right, approximately. And what are you withholding from that paycheck? Do you max out your 401k or TSP? I don't max out the 401, the TSP. So it is a TSP.

I don't max that out. I just contribute to the match. And one of my reasons for that was I wanted to try to save up an emergency fund before I started maxing that out. But that's been one of the challenges is keeping that. built-up savings fund. Great. And you live in the city limits of D.C. proper. So sorry to any D.C. folks that live over there. I'm in Arlington, Virginia. I can see the monuments from my apartment, but I'm not technically in D.C. So taxation with representation. Yes, correct. Yes. I'm in Virginia. Awesome. I know the area. It's very expensive. Very expensive. I live there. Yeah.

I have several questions. You talk about your savings and you save up and then something happens and you need to spend that. That sounds like an emergency fund to me. Do you have an emergency fund or is it just this savings account? So currently I don't have an emergency fund. That was something that I put off until I paid all my credit card debt. I was going to, to ask you all about this back when I applied. But now that the credit cards all paid off, it's kind of a, it's a little moot. But I wanted to put off saving anything until all of my credit card debt was gone. Just putting everything to that made me feel better as I watched it chunk away over the months. But then again, I don't know how wise that decision was. Because now I'm zero credit card, but I also have zero savings. So, yeah, that's kind of where I'm at with my savings right now. And have you thought about changing jobs or have you explored the private sector job

market? The government security is awesome, but they don't pay that well. Whereas data, data, what did data? Data scientists. Yeah, data scientists can make a lot of money. Data, programming, you could make a lot more money in the private sector. You could even go out. Do you have a security clearance? I have not the top secret. I have just the normal secret. So I do have a security clearance. Okay. So those are, that's a perk. Those are expensive to get. And having one, how long does your security clearance last? That I'm not sure about. Okay. Having that, it's a lot easier to renew it than it is to just get it brand new. And that's, it's a lot cheaper to renew. as well. So having that and going out and looking in the job field in the private sector could get

you contract jobs with the government and could get you a lot more money. So I would first encourage you to look within and see if there's any opportunities internally. But if there aren't, look at the private sector jobs and see what's available. That doesn't mean you have to switch. But if you're making 100 with the government and you look and you're looking and you're like, oh, data scientists make $250 in the private sector. That makes it a lot easier to switch jobs. And the 5% match is super awesome. But if you're getting $150,000 rates, and I'm just making that up, I don't know what

data scientists make, but I know they make a lot of money. So you could be jumping over, what is the phrase, jumping over dollars to save pennies by staying for the match if that's why you're staying. There's a lot of other perks for working for the government, but there's a lot of perks for working for the private sector called dollars. So I would I would encourage you to look and just explore. That doesn't mean you have to change, but just see what's out there and see if it's worth it. I do, I do have a response to that. And that is one thing that I did think about for a long time, especially earlier this year. I earlier this year got a promotion to the 106. I was previously

the first half this year making about 86. And I was looking at going to the private sector because I just graduated another basically certificate program from Georgetown University for data science. And my professors there told me the same thing. You don't have to stay with the government. You can go and find something that pays way more. Around that time, though, that's when the tech layoffs started. And it was also really hard to find people that wanted to hire another data scientist. So that's when I did look internally.

And I said, if I can't leave, let's look internally. And I did find that promotion. So that's been nice. And I totally hear you. You know, it's something that I thought about. And it's kind of weighing, for me, it's weighing out the nice, happy lifestyle that I have, working from home 100%. Get a lot of time off, spend a lot of time with my wife and my pets.

You know, it's very happy on this side. And I still have something, I still have a good, in my opinion, I can still save about 20% of my income, as long as I'm not paying off the credit card. But you're right. You know, I do think about that often, leaving the government for the private sector. Well, let's go to the other elephant in your financial situation, and that is the student loans. Currently in zero dollars, how long, you're eligible for public service loan forgiveness? Yes.

How much longer do you have in your public service to get the loan forgiveness? Right. I started in 2019. I believe I should have about six more years by the time I actually have to start paying actual dollars. So to explain that a little further, when I first got this job and certified my income for the public service loan forgiveness, they go off of your most recent tax return. It just so happened to be that the last tax return I got was under the income, for me to make a payment. So they gave me a year of zero dollar payments that all count towards my forgiveness. Each one of those might be zero, but they still count towards the total 120. That following year was 2020 and COVID hit and then the forbearance started. And they kept everything at zero dollars. To make a complicated and long story short, I've had about three to four years of zero dollar payments that all count towards the total 120 versus the past four years of me actually having to pay something forward. So I do have about, by the time I have to start paying an actual payment next

year when I have to recertify my income, I would already have four years done and I haven't paid a cent. And then by the end of the six years, they'll forgive the rest. They forgive the entire amount. Yeah, after 120 payments within a within the limits of what they're, you know, the rules. And so you have to stay working for the government in order to get this. Is that correct? Correct. But they don't have to be consecutive. I could leave and come back and continue those payments. But if, say if I go to the private sector and work there for a year, the payments that I would make there, even if they are under the income-based, driven like income based payment plan those won't count because i'm not full time for the government

you have to be full time for the for a government organization or a non-profit what are the what are the biggest pain points right now and and things that we can help you with like like where do you want to be in three to five years where do you want to be at the end of this year what can what can we help you with so i think there's two things that will help me in the short term uh and then will eventually build up and walk me into the long term. One is maybe something that, you know, Mindy has a lot of experience with, given that you've been tracking your, your budgeting a lot, is maybe better ways to really effectively track my budget, even if it's real time. Because what I have a problem with through the months is that I make a budget, I write everything down,

I take the exact amounts, I allocate dollars to a specific group of, type of spend, but it's pretty hard sometimes to track that throughout the month in real time. And it kind of gets away from you sometimes. So do you have any tips on how to track that in real time or more effectively? Yes, I do. You sound like the perfect candidate for a product called Cube, which is a digital cash envelope system. It's Q-U-B-E.

they take you put a certain amount of money into your bank account it is a debit card attached to an app on your phone and in the app you allocate so much money for each category groceries are 300 car payment is 249 cell phone is 113 and then when you're at the grocery store you there's no money on your debit card you have to take on the app from the grocery budget and put it onto the card I'm about to spend this much money. And if your grocery budget is 300, but you're about to buy $400 worth of groceries, it won't go through because there's only 300 in there.

So in real time, you have to readjust your budget and take the money and put it in a different, from a different category into the groceries so you can buy the groceries. I mean, of course, you can cheat and swipe a credit card and be done with it. But that helps you track without tracking where your money's going and being more conscious of,

of it in real time because I love the Waffles on Wednesday spending tracker, but I also had time for a while to track my expenses as I'm spending money. And then after a while, it got to be kind of daunting because it was a lot. And as you can tell, I've stopped tracking my spending in real time, but I've got other things going on right now. So that could be a great way to do it. You've got some, like gasoline is. a great way to, to, that's another, animal supplies.

Home utilities, maybe, maybe not. But it'll help you with everything that you're swiping a card for, swipe your debit card for. And then you can see, oh, wow, I'm really not spending only $55 in gas. It's actually much more. Or I've got accounts that I don't have allocated in my cash envelope system. I'm actually spending way more money than I thought I was. And I think in addition to the great points,

he's making about Cube. I will say this. I just doing some simple math here. We say rents 2279 groceries are $300. That's preposterously low. Car payments 249, cell phones, 15, Wi-Fi is 103, car insurance is 100. Just the fixed items there is $2,800 a month. So that leaves you with $900 for groceries, all your fun. your, all the rest of life is $800 in Arlington, Virginia. No way, man. It's just not reality. You're going to hop on an airplane a handful of times a year, right?

You have family that's not near Arlington, I imagine, right? So those things are not accounted for in your budget. So I think you need to go back for 12 or 18 months and say, no, no, no, what's actually happening in my budget on an overall basis? And if you're not setting aside money for those other categories, like again, airfare, you know, these larger items that come up less frequently. And I would put in like a $500 miscellaneous budget per month because life happens and you need to, you know, repair the car or whatever it is.

And so you're not planning for those expenses. And that's why your budget is evaporating on you on a regular basis is because that's not mentally accounted for. in addition to the system that Mindy just outlined here, which will help you actually get a really firm grip on that and control those expenses. Yeah, that helps. You're going to be in a negative feedback loop here because of the way you set up your budget, you're going to say, oh, I should be living off of $800 a month. Aside from my fixed overhead here, you're going to be absolutely miserable and you're going to whiff every month on that budget, would be my guess. And I think that's what sounds like is the problems because a lot of the times it is things that you just said, like the car thing or the dog gets sick and you got to go and it's a $1,500 bill, you know.

So it is those kinds of things. And I think that is going to seriously help me if I can go back and add those in to my plans. Would you say to, I guess, small percentages of those things where I kind of like, calculating cap X or something like that, but, you know, putting a certain amount aside, you know, you see my budget there. So would you suggest, like you said 500 as a misk? I, you know, there's probably three approaches to this, right? One is do your very detailed thing. Think of all the possible things and start allocating money in buckets for them, the car breaking down, the dog getting sick, whatever, trip home for Thanksgiving.

whatever those things are, and make sure you plan for them throughout the year. The other would be to, you know, and I'm lazy. So I would just say probably personally, oh, all right, I'm going to buck at 500 bucks a month for that stuff. That's $6,000 a year. I'm probably, I have not, on average, experienced more than $6,000 in nasty surprises over the course of a year. That's going to work, that's going to work for me.

That makes a lot of sense, and that really helps me out. I think the next like follow-up question. I know I'm starting off with super beginner things, but I am kind of in that very first stage of financial, my financial journey, I would say. And I'm trying to get to that second step. But for me, it's keeping the savings held onto.

I keep getting out of credit card debt and then having a great plan. The emergency savings starts building up and then something happens. Do you all have any strategies I could use to ensure I don't spend those savings? Do you all have any fail safes or anything like that? Do you think that would help? So I think Mindy's got some things, but I just want to echo this is directly related to the point we just discussed.

You got to you got a plan. You're building an emergency reserve that's really, you're not really building an emergency reserve. You're just, you're saving just enough to not fall behind when these unexpected things come up. You're not actually saving because you have to account for these. things in your budget. So I think that they're directly related. So once you've accounted for those, the money on top of that, you know, the money you're saving plus the $500 you're setting aside for life is actually what would be going towards an emergency reserve that would, that would, you know, be able to handle a true emergency. It's something that's not day-to-day or month-to-month

expenses. Yeah, that was going to be my suggestion is create an emergency reserve account and a savings account and your emergency reserve account needs to be built up. And this is for emergencies. This is when your car breaks down or your furnace goes out or whatever while you're renting. So it's not for when your furnace goes up. But it's for true emergencies and then have a savings account. And your savings account is for savings. And they are different accounts. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments. the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like

Monarch. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code Pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking.

You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code Pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code Pockets. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast?

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forgiveness, PSLF. Public service loan forgiveness. That's what I wanted to talk about. You haven't wasted that because you haven't paid anything into it. That's zero dollars that you have paid for four years that still counts. But if you could take a job that doubled your income, you could live on your current income and throw every extra dollar at those student loans and be done in a year or two. And then go on and do everything else that you're doing. Have your emergency fund. Have these student loans. I mean, and when you're paying them off, when the interest is still zero and zero is due, all of that money goes right to the principal. If you love your job, that's different.

But if you could make so much more in the private sector, then maybe that's the better option. Another thing you could do is look for private sector contracts that you could do in the off, You just got married. Do you have children? No. Okay. So, yes, you just got married and you want to spend time with your new wife, but you could do a short-term contract, make a bunch of money, throw it at the student loan debt while still working your government job and growing your student loan forgiveness or throw it into an investment account or throw it into your savings account, your emergency fund. And then check out where you are when you've saved up $108,000 and say, hmm, now I can.

pay this off, quit my job and move on. Or now I can, I'm almost there at the, I mean, if you were nine years into a 10 year plan, that's different than four years into a 10 year plan making. Right. I would say significantly less than what you could in the private sector. Definitely. And unfortunately, I can't do the contract work while I work for the government. That's, there's a, there's a pretty strict non-compete there that the government won't let me do that same work. But I hear you in that the lever that I can pull is increasing my income. income. And that's something that I've thought about for a while. Yeah. What does your wife do and what will she do? And how much will that bring in? Right. So she just got a job as a biomedical equipment technician.

So she's a biomedical engineer. She fixes hospital machines and devices. So that is a very technical job as well and has the potential to rise a lot. And looking forward to seeing her first paychecks as well, because that's going to seriously help me covering these bills because a lot of that's all, all of it's all me. Great. And how much will she bring in? So she's going to bring in 52,000 a year. And if you want to say like gross, you know, a month, that might be 4,300.

Maybe after taxes, the taxes around here can go up and they can be kind of high. but we're expecting that she brings in around somewhere between 2000 to 3,000 net a month. That is all going to be gravy if you are able to. So right now, the picture that's warming in my head about your situation is you are treading water. You're not getting ahead, but you're also not really falling behind at this point in time. You don't only have a lot of consumer debt. You have small amounts that you're about to finish off here in the TSP loan, and you have the car payment. perfectly normal, right?

A 15 grand. And then it's the student loans, right? But this is, you're not getting ahead and you're not accumulating more consumer debt. Exactly. So your wife's job is going to put you in the black, $25,000, $30,000 a year. As long as nothing changes and you don't start spending more. You don't have more to spend. You've been treading water, presumably waiting for this opportunity for your wife to start earning income.

Now, do you guys plan to start a family in the next couple of years? Nope. Okay. So this is going to continue on an ongoing basis. So what you should do now is you should go back and revise your budget and say, it's nice that you presented these numbers to us, but they're not the reality of your spending. Your spending is probably about $1,000 a month higher than what you currently have, what you presented to us.

You should reflect that in the reality and say, great, when your wife's income comes in, you're going to put $2,000 or $3,000 to that emergency reserve every month for the next six to 12 months, and you're going to come out with a $20,000, whatever you think is a comfortable amount, $15,000,000, probably, and that ballpark is going to be great. And you're going to be really secure at that point because now you're actually getting ahead compared to what you expected because your numbers are realistic and you can actually meet them on a monthly basis. And you're going to actually have some cash in the bank.

after that, now we begin to think about investing an asset allocation. I think Mindy's completely correct, and there is a great thing to think about, should I be, can I earn way more money as a data scientist in the private sector and pause this? Your situation kind of makes me anxious to a certain degree around the student loans, because you've got six more years left before you get forgiveness, that feels like a trap, a mental trap. I can see how that's just, and if it was 20 years, I would say, okay, let's just forget that even exists.

That's not even a part of this lifetime. Let's go pay it off and crush the debt. If you said it was next year, I would say, okay, let's let's push through the next year. Six years is long enough that you can completely change. change your trajectory and get close to a net worth of a million dollars in your situation if you wanted to make a couple of reasonable bets that were significant, like a house hack or something like that from a property perspective and make a couple of job changes and invest aggressively. But it's also close enough around the corner where, okay, 10% of that, if you believe me that

you get to $2 million or 20% if you only believe you can get to $500,000 in net worth over over six years is going to be this student loan forgiveness component. And so sticking it out to get that could make sense. My lean is that if you're willing to get aggressive and really lean into personal finance, you want to be a millionaire fairly quickly and be self-made so that that helps your aspirations for the U.S. presidency in a few years. That I would start thinking about, I would just kind of forget like, okay, that's nice that the student loan thing exists, but my potential is worth many multiples of that, and that

potential can be unlocked by aggressively pursuing other alternate opportunities with this. What's your reaction to that assessment of the situation at a high level? I do actually have a really great reaction to that because it's something that I've thought about, specifically on the aggressive investing side. I have a very aggressive want to not just be okay millionaire. I want to really achieve a high net worth. That's why I really want to go into business acquisition. I would love to own not just one but multiple businesses. To me, that's extremely attractive. And I guess I could say my goal materialistically or just vision wise. I want to live, I know this sounds silly, but I want to live in a castle. I want, I want,

I grew up as like the nerdy kid that loved knights and dragons and stuff. So for my personal finance goal, I always told myself specifically was, let's go get a castle. And then I started looking at how much that was. And I thought, well, I'm going to need a lot of money. So how do I make a lot of money, right? And now I'm here. Like you said, I'm not really getting ahead. And that's what I'm trying to do.

So I'm trying to find that path forward that's aggressive. that's realistic and but I need the change right I'm still here trying to make savings happen and I'm not making them happen so for me

I'm all on board with going aggressively just to be clear you have paid off you have paid four years of dues towards the student loans and you have six more to go for a total of 10

is that correct to get to the forgiveness to get to the forgiveness correct yep okay great no I think this is this is great Look, that's a big vision. I love it.

Live in a castle. Let's back into something that allows you more flexibility. And let's start with an obvious truth. You ain't going to live in a castle and be a millionaire a couple times over with several different private businesses working at a government job, making $106,000 a year, waiting, spending the next six years of your prime potential, wait, you know, trying to let them the student loan forgiveness. a crew slowly. That is a trap that you're about to fall into relative to the vision that you have outlined. So you can't do that if you want to get there in the next 10 or 15 or 20 years. You can't just wait six more years to delay that.

You've got to start taking some. And this is compounding. So you're not going to get there overnight. But you've got to make the first 10% of progress towards that vision in the next year or something like that. right so that involves a large amount of self-education on how to run businesses do you know anything about running a business uh surprisingly i do before i worked in the government i had small business experience i mean of course i have a degree but honestly uh you know a degree is not going to really put you in the position to run a team of people be in charge of everything both on

hr accounting and staffing just everything that goes into running a business but i do have some experience and uh so yeah i do And what you're saying is I 100% agree with. This is why I'm actively and I guess the word is aggressively looking to acquire a business versus real estate. So that's another thing that we could talk about. I've done quite a lot of research and reading and things like that on business acquisition as well. And I've started a pretty good network. What kind of business would you like to acquire?

So there's two kinds, right? And they are very, very different from each other, only because that's where my networking has led me to. One, which is the most obvious, would be tech or IT consulting, right? There's a lot of those that are out there for sale. They're much more expensive and you would need investors backing you. There's things like search funds. Angel investors, not really, but search funds are basically a group of investors that find an operator that. has experienced in that industry, and they'll back the acquisition and put you in with a small percentage of ownership. So that's one avenue that I've considered and thought about and made some connections with, given the IT route. There was another route, though, that when me and my wife were talking about it, it's completely different, but it's something I've always talked about in my spare time. You know, I've talked to her about one day owning a wife. It was just kind of like this one thing that I always said, right? I would love to own the land, grow the grapes, make the wine.

Of course, you know, hire the right people. But I had said it all the time. So she said, why don't you look for that instead of all this IT stuff? Because that's what you seem more passionate about. So I did. I actually got in contact with an owner of a winery that was selling his winery. I couldn't make a deal happen. But right now we're actually looking at helping him expand into a remote tasting room.

So, I mean, there's, there's connections there, and those are the two industries, which are obviously completely different. But right now, for me, it was more of a, let's go get out there and learn and talk to people and just see what's possible. Okay. If I was starting over today, or, you know, let's say that I get fired. I hope I don't want to get fired. I like my job. Please don't fire me anybody if you're listening to this. But what I would do is I would be looking in the small business space.

I'd be looking at services-based businesses. So these are janitorial businesses, carpet cleaning businesses, those types of home remodeling, landscaping. Yeah. Landscaping. Exactly, right? These are businesses that in many cases have been run for 20, 30 years by the same individual, don't have a website, don't have employee management protocols, generate $300 to $500,000

a year in free cash flow, in many cases, a good living, but are not scaling, they're not looking for other opportunities. These are businesses with no one to buy them. Lots of baby boomers are retiring, and there's nobody lining up to buy these businesses. There's more than just financial considerations for the seller. This is their life's work. They know their employees. They can't, they don't want to give up on the business and have their employees who they know who are part of the family be let go or not have a place to work. They're moving the owners from Denver to Florida. I know if you, I know some folks that that fit that profile, for example. Great.

So you can buy the property, buy these businesses for one, one and a half, two times cash flow. You aggregate them if you buy three or four, for example, over a five year period. each one expands operations a little bit. You're looking at a three or to five million dollar EBITDA or profitable business. That's a business you can sell to, for example, private equity for three, four, five times cash flow. That's a really good arbitrage. That's a really compelling investment thesis. I would want to hear that. It doesn't have to be that thesis, but a thesis like that from you, if you're going to seriously consider, or leaving a six-figure career to go and pursue something like that, right, and say,

okay, that's something that we can do that we can do there. I think that a search fund or looking for investors is great, but what's way better is bringing $50,000 or $150,000 to the table as part of that and saying, this is, the last three years, I have spent reading up on how to, how to run businesses. I have taken this internship or done this on the side in order to home myself. skills. I also scrimped saved, hustled my way to saving $150,000 in cash. I'd like to buy your business. Here's the partner, friend, family, whatever that's going to go in with me and bring the other $300,000. I'd like you to carry $100,000 or $200,000 in the note, and I'm going to use a

small business loan to finance the rest of it. Okay. Now we've got a really compelling case. I don't know what you would have said to the winery salesperson, but you're not a serious buyer in the current situation because you don't have you don't have you can't tell that story and and then come to the table with $150,000 in cash or a hundred or something some amount that says I'm serious and this is a big percentage of my net worth and I'm going to I'm I'm going to go in with whoever my whoever is is willing to take a shot on me as an investor be it be that friend family member or the person so I think that's that's a great path forward I would love uh I love folks that that are that are interested in going after something like that because I think it's a phenomenal opportunity and it's

more of the best asset classes and opportunities that exists in America right now. But I think that that's something that you need to consider getting it. Oh, well, I totally agree with you. I had a similar thesis somewhat with the winery owner. You know, I explained to him what my plan would be for growth in terms of acquiring other smaller wineries because since his is a slightly larger, I mean, And that same thesis can be really applied to a lot of different kinds of businesses, is that you find that platform business, you start acquire, grow through acquisition of other similar type businesses, and then you can have an exit. So I explained that similar logic to him.

Of course, I didn't have any money to bring to him, but I did say, let me go find investors and see if we can make this happen. That just got me with a lot of SBA lenders, a lot of other kinds of folks, but either way, you're totally right. That is the path and that is the kinds of thesis that I am trying to build, but it's going to be way, way, way more powerful and way, I think, not easier, but it's going to be better if I have that 150,000 or so, you know, capital on hand to actually invest into it. And that's one of the main reasons why my pain point is getting an emergency savings, getting a savings, and building it up and stop letting it disappear because that is the goal that I have.

Instead of getting a house hack or getting a rental, I want to get a business and I want to go into that. And that's, I read this book. I know we're going to talk, like have the favorite book, but the buy then build. This was happened in my little rabbit hole. This is by Walker Debel. That came, you know, somewhere after Rich, richest man in Babylon millionaire next door. That one popped up on the suggestions.

and I read it blew my mind. It totally opened me up to everything that you just talked about. And I realized that's the path that I want to go on. But I need to take the first steps, you know, how do I get to that point where I can make that kind of deal happen? Here's the homework, if you will, that I would assign you, right? First, we got a big set of visions here. You should write down a piece of paper the reality you want to see yourself in in three years, five years or seven, years, right? I do not think a castle is likely in that three, five, or even seven year vision at

this point. It could be in your 20 year vision. I also do not think the U.S. presidency, but I think it doesn't sound like you're aspiring to be president any longer at this way. Not too much. It was just a starting off point. Great. Well, I love it. I would put together a vision and put it on paper and look at it because you got some big ideas and you need something that you actually believe you can achieve in three years, let's call it, right? And life can be pretty good in three years if you make, if you, um, um, uh, uh, make some moves. Second, you got to make a move on the career front at some point, right? Your career, your career is fine. There's nothing wrong with it. It's just not going to get you to the vision you just articulated. You're going to be sitting back in five,

10 years saying for you, that wasn't good enough, right? It's good enough for a lot of people, but that's what I'm hearing you say. So you're not going to be comfortable with yourself if you don't take a shot. You're also not in position to take a shot right now. You have no cash savings. You are treading water from an expense standpoint. You need to make some changes here. One of those could be switching a job in the short run to increase the income. The other is simply building the emergency reserve, which should be very achievable for you guys now that your wife is working. And you can also consider some things on the expense front. Can you move farther away, for example, if you're working mostly from home? I know there are cheaper areas in Maryland and Virginia,

where you could bring that rent or rent down by a few hundred bucks a month pretty easily. So those would be some tactical things in the short run. Understand that those are building blocks to the first six, 12 months of emergency reserve, which in your situation, emergency reserve is probably better than a formal investing approach. You plan to buy businesses, or at least that's where you think you are right now. So why would you put the money in stocks if you think you can earn a 30, 40 percent return on a business that you buy and learn over a period of time? And then last, you need a business thesis. And with that thesis, you know, very few people are probably going to go in and invest with you on one of those businesses

in the near term. So you need to say, how do that? do I increase the power of the story that I want to tell to a potential investor or a seller of a business who I hope will seller finance portions of that business over the next year or two? I'm going to read these 15 or 20 books on being a CEO. I'm going to have a written investment thesis that establishes that. I'm going to bring together financial returns, social good, the well-being of the employees, the well-being of the seller, all those things into one pot. Make everybody money, make everybody happy in this, and demonstrate that skill set. I'm going to bring in this coach or this mentor to help me with that. All right, put together some sort of plan that makes

that story believable so that a year from now, you're actually reasonably close. I could, if I wanted to, bring $30,000 to a purchase. And I've got a bunch of books and clear, I've got a network of these things. I've talked to business brokers in the area. I've got real, I've actually analyzed a few businesses and deals with this. So those would be some of the things that I would provide as next steps here. And a year from now, again, you could be sitting on $30,000 in cash, progress along the journey here so that you're not coming on and coming on to a seller and saying something that sounds pie in the sky, like perhaps it's out of it to the winery seller. You're coming in with something that sounds, okay, maybe. And then two years or

three years, you're a no-brainer. You're going to win. You have a serious chance to win a couple of these things. So that would be my advice to you, in a nutshell, is make that story compelling, have hard evidence in a year or two or three of slog behind that that demonstrates your credentials that are beginning to compound behind you and make the story seem go from impossible to inevitable, which I think is a book title. Someone's... Sounds like a good one. If it's not written, get to it, right? Well, that sounds, that sounds fantastic. Yeah. And that's the, that's the advice I was hoping to hear. Is your wife on board with all of this?

Absolutely. That was one of the main points I think I looked for before I married her. I listened to y'all's money dates and also, you know, the pre-nup episode and all of those things. And we did not get a pre-up. But we did listen to the episode and then both episodes or pretty much anything that we could find that was on marriage finances and really sat down and talked about how we wanted. to do it. And she's also very business-minded, too. She wants to have a business one day as well, but hers is in the medical equipment industry where she wants to invest in medical equipment and rent them out to hospitals. So we both have that same mindset, and we're both on the same page

with what we want to do. Awesome. Well, I look forward to hearing what you do next from a story standpoint. And when you do move into that castle, please send us a picture, because that's awesome. I love that. I love a big vision like that. Thanks. Absolutely. We'll do. Maybe all can come by and check it out. Yeah, for sure. Airbnb at a tower or something. Yeah. That would be a fast way to get to your castle, right? Yeah. If you can find a way to, if it's a great vacation rental. Right. Exactly. I mean, that sounds like really awesome. I would take that Airbnb or Verbo, right? Well, awesome. Anything else we can help you with before we head out, Richard? No, I mean, I've got a lot of information.

and homework that I can do that I believe is going to help me. And I think it's just fantastic that y'all brought me on because I'm such a beginner, but I do think there's just a lot of people out there in my circle, at least, that listen to y'all's show, but they're in the same place as I am. We're okay, but we're not getting ahead, and we would like to get ahead. And I really think this episode gave me those really small but important fundamentals that are going to get me moving forward and achieve those. financial goals that I've set for myself.

Well, I'll leave you with one last thing there then, which is if you want to set a big goal for this next year, because it's going to be an incremental year. You've got to save up the emergency fund and begin pouring a foundation to get there. The best way to do that, the big goal would be read 50 books. Pull out a book a week, get a shelf in your house, and pile up 50 on it over the course of the year that are relevant to this. And you won't be a beginner anymore from your frameworks, and you'll figure out what you need to do.

Well, I'm an active reader. I've probably read 50 books this year or more, but half of them fiction. But I think I hear you, 50 books within that same field of knowledge, right? 50 books that move you towards your goal. Right. Right. Cool. It's going to happen. Richard, great to meet you. Thanks so much for coming on the show. Yeah. Thank you, Scott. Thank you, Mindy. I really appreciate it. I had a great time. Thank you, Richard. We'll talk to you soon. Yeah. Bye-bye.

All right, Scott, that was Richard, and those were some pretty lofty goals. What did you call them? Well, that's a big vision. That is a big vision. And I like that he is thinking long term and thinking large. But I also think that we gave him some pretty good things to think about, including increasing his income and diving into that public service student loan forgiveness plan to make sure that that's really, truly the path that he wants to go on.

I mean, I would look into that a lot further if I were in his position and really run the numbers and see, does it make sense to forego the extra income to get that $100,000 wiped out? And honestly, I don't think it is. Yeah, I think that it is a big vision. I love it. I think that it's great. and I would, you know, I'd love to see more people with huge visions like that. I want to live in a castle. That's awesome.

Let's do it. I don't want to own multiple medium to large businesses. That's what I heard. Okay, we want to do that. Let's get started and understand that that's not a 40-hour-a-week vision. That's a 80 to 100-hour-a-week vision. That's how I'm going to work all day. I'm going to spend very little.

I'm going to read a book every single week for a year. That's directly relevant to those goals. I'm going to be going to bed and dreaming about. this vision at night. I'm going to save every dollar I can, find every development opportunity I can, take a significant risk from a reasonable position of strength at the earliest possible opportunity, be serious, and go after it. Richard is not yet doing the things necessary to make that vision come to pass, and he'll have to decide if he's willing to do that. A lot of people are not willing to do that, and a lot of people can become financially independent, and

build a significant net worth within the next six years by sticking out a job that pays $106,000 a year with their spouse making 50 and saving up a good income, even in a high-cost living area like D.C. He could become moderately wealthy and on a path to financial freedom if want to do that. But if he wants to achieve that vision, serious, serious steps on multiple fronts need to be taken in multiple directions. Absolutely agree, Scott. Should we get out of here? Let's do it. That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench and I am Mindy Jensen saying let's jam Sam.