BiggerPockets Money Podcast - 417: Finance Friday: Why I Spent $100K+ on My Four-Legged Friend

Episode Date: June 2, 2023

Pet insurance probably isn’t a top priority for you right now. Your budget might have health, car, and home insurance, but pet insurance? Is it really worth the cost? Today we talk to David, an engineer and part-time wilderness trip guide, who was hit with an astonishing amount of vet bills after his beloved four-legged friend, Blaze, was diagnosed with Lymphoma. This unexpected bill damaged David and his wife’s investing plans, but not all hope is lost. If you have a dog, cat, rabbit, lizard, or other non-human friend (sorry, your kids don't count) living at home, this is an episode for you! We’ll get into the nitty-gritty of what happens when your pet has an unexpected medical diagnosis, leaving you with a mortgage-sized bill to pay every month. While many of us have animal companions that make our life whole, few realize the cost of paying for treatment when a life-threatening disease comes into play. You’ll hear about thepros and cons of pet insurance, whether or not it’s actually worth it, and the hard choices you may have to make when adopting or purchasing a pet. But it’s not all bones and hairballs in this episode. Our guest David also has some exciting news about a six-figure business he and his wife are building. With David’s wife itching to start taking this income stream to new heights, David is debating whether or not giving up one of their stable incomes is worth the hit to their retirement accounts. Thankfully, Mindy and Scott find a workaround to keep them in a FIRE-first position! In This Episode We Cover The true cost of a sick pet and how to deal with six-figure vet bills Pet insurance pros and cons and what to look for when choosing a policy Serious side hustles and how to turn yours into a six-figure income stream Keeping your stable job vs. following your passion and starting a business  Why reaching financial independence fast IS NOT for everyone (and what to do instead) Cash reserves and why keeping your expenses low will help you deal with medical emergencies  Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Join BiggerPockets for FREE Mindy on BiggerPockets Scott's Instagram Grab Scott’s Book, “Set for Life” Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets Money Moment Take a Trip with Blaze Adventure Tours Pet Insurance Links: Healthypaws Trupanion Mid-Atlantic Federal Credit Union HELOCs Click here to check the full show notes: https://www.biggerpockets.com/blog/money-417   Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Email us: [e-mail] Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast, Finance Friday edition, where we interview David and talk about balancing pet medical bills, starting a new business, and repositioning your retirement contributions to make lifestyle better. Hello, hello, hello. My name is Mindy Jensen, and with me as always is my rock star kicker co-host Scott Trench. You might be unaware that Scott is famous as a kicker for the football team of his high school. That's right. I was on a great high school football team. We won states twice in a row in Maryland, which is not no slouch. It came up today because our guest, David, is from Maryland and went to another local powerhouse football program high school called Sherwood. My high school was River Hill. And I was all state as a

kicker without kicking really any field goals. I had one field goal my senior year. I just could kick it into the end zone at a high percentage at a time and get a lot of touchbacks. So Mindy, thank you very much for the nice intro. And with me as always is my. My great always has an extra point to make a co-host Mindy Jensen. That was a good one, Scott. 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 are 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, or start your own business, taking fantastic trips around the country to beautiful places and around the world. We'll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams. I love that little foreshadowing you do at the beginning of every show, Scott. This one is very interesting.

We start off in one place in the show talking about the pet medical bills that our guest has, but quickly pivot to his side business, which is actually rather exciting. I would love to take a trip with him. him. They run, he and his wife run adventure tours, which sounds like so much fun. Before we bring him in, before we really get into that discussion, I have to tell you, per my attorney, the contest 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. Before we bring in, David, I do want to have one quick point that I want to make. We are going to talk the issue with his dog and the expense associated with that would have been a devastating impact to many other people's financial positions. We are going to talk about that in detail in the outro, and we're excited to welcome our producer, Kaelin, who is an expert on pet insurance, to come in and talk about some of those some of the nuances there. So if you're interested in that topic, stick around for the outro. We'll have a little segment on that that I think you'll find very interesting and helpful if you're a

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Today we're speaking with David, part of a high-salary couple with a sick dog. Their high monthly income is currently being dwarfed by the higher cost of dealing with the costs associated with severe pet illness. Today we're going to talk about rentals, side businesses, and debt paydown while pursuing financial independence with this great big asterisk. David, welcome to the Bigger Pockets Money podcast. Thanks for having me. Let's jump in because I've got a ton of questions for you.

I'm showing, in your money snapshot, a salary of approximately $10,000 a month split between you and your wife. Monthly expenses currently total $14,926. And that is because we have a pet cancer expense. Are we going to call this an expense of $6,200 a month for the first four months? months of this year. We also have $1,100 in groceries, $481, almost $500 in wedding and events every month. You look like you're about the age where all of your friends are getting married. So that's always fun. That goes down as you get older, just something to look forward to.

But, you know, various other expenses, I don't think anything is extraordinarily high, except, of course, the pet cancer treatments. On the investment side, you are doing fairly well. You've got a total of 71,000 in cash split up between 48 in personal, 15 in your real estate business fund, and eight in your other business fund. Let's call that your side business. We'll get into that in a minute. Investments for the future, 203,000. Nice job there. 71 in a Roth. 118 in a traditional IRA and 14,000 in a taxable account. However, we do have some debt. We have 26,000 in credit cards and 14,500 on a car loan. And rounding all of that out, there are, it looks like four rental properties. Yep, four, four pro. I like your diversification right now, but we have a lot

to talk about. First off, let's look at your money story. Give us a brief overview of what's going on. Sure. So, you know, I've married a couple years ago during the pandemic. And since then, my wife and I, you know, we've bought a house and we've bought four different rental properties. I guess one of them was actually a rental property I was living in. So I kind of did a live-in flip. I know, Mindy, that's a big thing for you. So I bought a house, fixed it up. It was a foreclosure. You know, redid most of the house myself other than like the roof I paid someone to do. And then my wife and I moved out of that into our current primary residence and turned that into a rental. And then we have, so that's also in Maryland where we live.

Where about in Maryland? Oh, we're up in Cadenceville near Baltimore. Oh, right. Same county as where I grew up. I grew up in Howard County in Columbia, Maryland. So small world there. Awesome. Clarksville, Marshport, J.C.C.C. Yeah, right down the street. Yeah. So, you know, so we've been into the real estate investing, have a few properties in the Cleveland area that have been successful. And then recently, we've kind of been looking at how do we want to design our lives around hopefully starting a family soon. You know, I don't think both of us necessarily want to work until we're 70 years old. and then stop.

I think especially with our side business is something my wife kind of wants to move into more and to sort of replace her primary job as we build a family. And so, you know, we make good income. I think we have some flexibility. It's really figuring out where we want to put our efforts and what we should invest our time and our money into to create the future that we won't have. Let's walk through, you know, part of the money story here. we got to acknowledge is your dog, I believe, who is sick in this unfortunate situation.

Can you describe what's going on with your dog? Yeah. So our dog, Blaze, we got him one week after my then-girlfriend. Now wife moved in with me, and he's amazing. He's like our child, basically, since we don't have kids yet. So he was diagnosed with lymphoma in, I think, It was October of last year. And we had no idea.

He was only three years old at the time. We had no idea that it's the most common cancer in dogs. And the average age is like six years old for a dog with lymphoma. And at the time, we were told there was no cure, so you can try to give him chemotherapy that might prolong his life. And then that's kind of it. But we found out that there's one place in the world. There used to be two, but it seems like NC State is shutting down their program. that does bone marrow transplants with a 90% success rate in curing dogs if they have a bone marrow donor.

So we've had to, we've tested, I think, 14 or 15 different dogs, which was fairly expensive. We finally just found out yesterday, actually, that we have a match for Blaze, so we're very excited about that. And we'll be flying him out to Washington State from Washington, D.C., with the donor dog to have his transplant. next mob. And walk us through what this has cost you and your pet insurance situation because we see there's a line item in your budget for that. Yep. So we had pet insurance for all of our pets through the ASPCA and it covered $5,000, which when we bought the pet insurance seemed like a lot of money or a pet illness. But it's so so far I think we've spent about $65,000 or $70,000 through treatment, diagnosing him, which was very difficult for some reason at the beginning,

and then the donor matching, and then we expect to spend another 50,000 in the treatment in the bone marrow transplant. And we have found a new pet insurance. The one we're using now is called Trupanion, a little plug for them because it's really a similar price and they have no cap on their payout. So our other dog track has that insurance now. So anyone out there with a pet, if you're like us, you'll do just about anything for them, get good pet insurance.

It can make a really big difference. Yeah, I think that that's a great takeaway here. I think, you know, looking back at the situation, it's, it's you are, you know, everyone's different. Some people would say, no way would I, would I go through with what you already spent for my dog. Some people are, I would spend 10 times that amount and put, you know, and pay it off for the next five. you know, decades, if that's what it took. So just you got to know that about yourself and get the unlimited cap, you know, or the unlimited insurance with the best provider available and shell out for that if that's, if you're one of those folks that are willing to do that. But we're here what we're

at. Thank you for sharing that so that other people can can learn from it. And my understanding, again is that you're $60,000 into this, and you're planning on another $50,000 on top of that for the surgery? Yep, that's about right. And do you have any debt associated with this right now, or have you been able to cash flow or finance all of it so far? We've been able to cash flow it. We're not captured in this as I've been working a lot of overtime, so that's helped a great deal.

And then we also have, we had some payout from the pet insurance, and then we have a go-fund me that we've been able to raise a little bit of money for. So we're, right now we're okay. The transplant's going to be a bit difficult, but, you know, we've gotten this far. So we're going to make sure we get them over, over the line. Okay. So what are the biggest things that we can help you with here today? Because when I look at that, this is a crazy expense. I've never heard of a pet situation that has cost this much, although I'm sure they're out there. But you cash flowed it so far, and you can cash flow it again. By my calculation, you've got $15,000 in real estate cash, $8,000 in your business account, and $48,000 in your personal account for $71,000. So a couple of quick reallocations, and you're still left with $20,000 in cash to cash flow it. So this is a setback, but not a, not even really the story. We don't even have to do that much, you know, financial gymnastics to get to get past this particular hurdle. Yeah. And we liquidated some. I had like a play.

investment account that had a little bit of my things like that so we've made some adjustments and pivots we've kind of I know in my in my worksheet that I sent you we have like you know how much we're investing per month and things like that we kind of just suspended that while we were you know paying for or while we are paying for the bills with the dog I think more you know this was a setback but you know if if I have to retire a couple years later because we saved our dog I think I'll I'll take that trade any day of the week But what we're looking at right now, I think we're kind of a similar age, Scott. We're looking to start our family in the near future and just try to design our life the way we want to and figure out, you know, what's the best strategy for us to invest?

Should we pursue more real estate? Should we consolidate some real estate? I have some questions about whether I should continue contributing to the Roth 403B or switch to traditional given our tax rate. And then I think we, and this is not something set in stone, but we have a side business. And an idea we've had is when we're raising our kids to, if my wife could move from her full-time job into that side business, it might put us in a situation where instead of having child care, she's just making less money. And we might have a better quality of life for what we want for our family. So just kind of figuring out with the situation we have now, what the best strategy is. the overall strategy is to achieve some of those goals.

You have a pretty neat side business. I'm actually really interested in finding out more about that. Can you tell us about it and how you got started with it? Sure. So we lead bicycle tours, backpacking trips, and we also do like corporate retreats and private trips like that. And so my wife rode her bicycle across the country for the Olman Cancer Fund when she was in college. And around a similar time, I rode my bicycle from my aunt and uncle's house in Los Angeles to my grandfather's house in San Francisco. And so we both kind of found this bicycle

touring thing. And then we got together. We rode our bikes across France. We got engaged backpacking in Scotland. It's kind of our big hobby. And during the pandemic, we didn't have anything to do. We were suddenly working from home. And so we decided to start a business. Being outside was about the safest place to be with COVID. And so it's really a passion of ours. I'm not sure if I had to pick a business, the easiest one to make money at. There's some challenges with that.

But it's something we're really passionate about. And it's still work, but I would much rather be on my bicycle or helping other people hike somewhere really pretty than sitting behind a desk. So as kind of like a retirement, it's quote unquote job, which I know a lot of fire folks do where you have a job that pays a little less money, but fits your lifestyle better. I think it's kind of the ideal job for both my wife and myself. So what sort of income are we talking about on this job and what sort of hours are you currently putting into it? Yeah. So right now it's at the really early stages. I think this year we're expecting to profit after taxes around. $14,000, so not a huge income. And we're not really counting on that money. We're going to be

investing that back into the business as we go. It really depends on how many trips and things we want to run. So if one of the limitations we have now is I only have so much leave from my day job, and so does my wife. So we can't run a trip every week because we're working. We are working on hiring some guides who will be able to lead trips so that we won't have to be out all the time, especially if we're starting a family, you know, we're not going to be want to be out on the road or or hiking in the backcountry all the time. But right now, I think one of the things that we're working on is, is marketing, getting, you know, some name recognition and building relationships with other organizations to kind of have trips. You know, there are businesses that do this stuff that,

you know, our multi-million dollar gigantic businesses you may have heard of. And then there's some smaller niche ones. I think we would tend to fall in the smaller category. But I'm kind of thinking if we can make, you know, $50,000 or $60,000 a year at this leading, you know, 10 trips and us only leading a few of those, that could be something that could work really well. So that's awesome. So how you said 10 trips, how many days in total would you be away from your house during those trips? So it really depends on the trips. But I'd say a good average would be four to five days.

For year, sorry. Yeah, per year. So let's call it 50 days of actual trips per year. With hiring guides and things like that, I don't know if we would have to be away all of those days. So one of the things we're working on now is establishing trips and routes and training guides so that we can be in a position where we're running a business. and we can go out on trips as we want and make a little extra money. But we have guides who are actually providing that service, you know, away from our house in the future.

What does it cost to market for setup, post, and run one of these trips? How does the cash flow work for an example? Yeah, so that's something we're figuring out. So the baseline cost is we have to run a website. Our insurance is pretty expensive because if someone gets hurt, You have to have insurance for that. They don't just sign a life away on a waiver? You do, but apparently those waivers are meaningless, is what I've been told.

Yeah, apparently they can still sue you. It's just a deterrent for people suing. And then we have a few permits we have to get if we're going to be in national parks or things like that. So it's a fairly low overhead cost just for the baseline of the business. Where we're trying to figure out is do we market on Facebook or on Google? you know, how we're marketing in person. So we're both lifelong triathletes. We've done tons and tons of triathons.

We're very connected in that community. So being out in the community, talking to people, getting people excited, establishing relationships, it's really more of a, so far has been more of a time commitment than a cost commitment. And we're a bit limited just because we have day jobs and we've been taken care of a, you know, a sick dog, which has been a time suck as well. But basic, to answer your question, I think to set up a trip, a $1,500 initial investment is probably a ballpark right now. Awesome. And what's the revenue for that trip? It ranges.

So we have trips that might just be an overnight. So your revenue will be somewhere around like $4,000 or $5,000. And then we have trips. I'm leading a trip in a few weeks. That's nine days long. and so if we fill that trip, the revenue might be $20,000 to $40,000. So there's kind of a range. And then the corporate and private trips tend to be around 10 to 20.

Oh, how do you get the corporate and private trips? That's what we're really looking at right now. We have another, we did one last year. We have another one this year. And then private trips is what we have, just people that we're working with. I think that's the niche that we want to move into because it's, especially the corporate trips. It's a group.

What they want is to give you a. call, not have to think after they make the initial decision, you take care of everything for them and they're willing to pay for that. Our costs are a little bit higher to run them, but they've been really rewarding and they've been a lot of fun. So I think that's a direction that we would like to pursue. So how did you get your first corporate or private trip and how can you replicate that? And that's not really something that I need an answer to. That's something that you should be thinking about because then you're not trying to get one off people to sign up. You're just selling the whole trip and they're supplying the people. Also, people already know each other.

So it's a more, it can be a more cohesive trip. It can also be a way worse trip if Betty from accounting doesn't get along with Bob from sales. What is the seasonality with this business? So it tends to run our trip tend to run from about May to October. Although I do have a dream. I've ridden my bike across New Zealand of taking some Americans out to New Zealand for a cool trip like that, which would be our winter. But it is pretty seasonal. And mostly summer and fall tends to be when people want to go out. 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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Okay. So what's the theoretical maximum for this business, basically we just talked about? I'm seeing numbers in the $300,000 revenue range. If you can book out that season. Yeah, I think if we dedicated and went full time and were successful, I think we could make $2,000, $400,000 if we built a big business. I'm not 100% sure if that's what we want or not. That's kind of a discussion my wife and I have been having in the short term.

because if we're having young children, being away can be, you know, difficult and things like that. I think our goal is more in like five to ten years having a business that's growing. I'm not planning on quitting my job, so we have that stable income. And then I was almost viewing if we can cover our expenses with my income, feeling bad as we can use that for, you know, vacation money and investment money and things of that nature. Have you approached your company with a reduced work schedule proposal? So I'm thinking about moving to a compressed work schedule where I'd have Fridays off. So right now, I'm the director of engineering. We're a small company and we're growing.

There's a path which could lead me to running the company in maybe 10 to 15 years. So I'm not really thinking about backing off of my work. I enjoy what I do. I like the people I work with. I do the things that I've been working on is getting more, just more leave. So working normal hours, but if I have six weeks off during the year or something,

if not that nature, I can have vacations. I can lead trips and I can have that flexibility. I also have a ton of flexibility with my schedule. just telecommuting. I can telecommute as needed however much I want. They don't really care if I, you know, if I work extra takeoff Friday, it's a very flexible workplace. The more leave is what I was really getting at. If you could reduce your time so that you are only working four days a week, but then, oh, I've got this big trip coming up. Can I work five days a week for a month or two months to bank this time if there's some sort of flexibility? there. Also, you said that you could be leading the company in 10 to 15 years. Is that something you want to do? Yeah, it is. I've been working, I've been here for, I think nine years now, and I'm 34, so most of my career so far. And I've, yeah, it's something I really would like to do. And it's almost, I've heard the term kind of like entrepreneur rather than entrepreneur. So I feel like

I have some entrepreneurship opportunities. Now I'm leading my own department, hiring people and, you know, kind of building the work that I like the most. So in that sense, I kind of almost feel like that's a good path for me. And then, you know, if there's an opportunity far further in the future to have like a semi-retirement or a reduced role, if I'm financially independent, I can probably work something like that out. Walk me through what your wife's job is and what she wants to do. Awesome. So she's actually also a civil engineer. We went to the same program in college. So she works for the USDA Natural Resource Conservation Service.

So she's out, her job's out of Annapolis, although right now she's 100% remote. And they work with farmers for a bunch of different programs. It's a lot for water folly. As you know, Scott, the Chesa Vique Bay here is kind of the big thing. So they're working on water quality. She's kind of administering programs and working kind of at a state level for regular. I think for her it's more of a job than a career, if that makes sense. I think she is more of the mind of she would like to move into the business and make

that her full-time thing eventually. But she also has a good paying job with great benefits and all of that. Okay. So here's my big question. You guys make a combined 225K a year. And you have these aspirations for a business, but neither of you want to quit your job. So like what, which is it? How do we help you from a directional standpoint with this?

Like, you know, I'm, I'm, I, there's a lot of paradoxes here today. You've got this dog that is sick and that seems like a big issue, but you've got the cash to cover it. And you can just work extra to cash flow and that's where your values are aligned. And then you have this business that seems like a great idea, but you also have these jobs that are a great idea. So we're kind of choosing between several different good options here. And I'm not I'm not really able to tell which way you're strongly leaning from these. What is your instinct and what do you want out of the next phase here?

Well, if you told my wife she could quit her job tomorrow and do the business and it would be fine, she would say, great, see you later. I'm done with my job. So I think there's a pretty strong feeling there for her that she would much rather be working on the business. I think there's a little bit of our lives are comfortable and we're making good money so it's scary to commit more time and energy to the business or like leave the job and work on the business before it's making money. I think that's probably a little bit of a fear based. We're kind of slowly building it. And also everything with the dog going on this year, we cut back from the expansion that we were finding with the business. But it really, it's like I look at the spreadsheet.

and it looks pretty good, but we're not financially independent. I don't feel like I have a, you know, especially if my wife wasn't working, we wouldn't have a ton of extra money to invest and do all these things. We'd really only be just about paying our bills. And so I'm trying to figure out how to make that happen in a responsible way, I guess. I think the big elephant in the room is the dog medical bills. And until those are done, there's not going to be a lot of flexibility. Because if she's not working, you can't afford those dog medical bills.

That's the bottom line. So that will have to get past that. But then once we're past that, you've been cash flowing that so far. And you do still have a lot of cash on. for what looks like the remainder of the bills. It doesn't look like you're going to be tackling taking on any more debt with regards to that unless something else pops up. Is that accurate? Yeah, I mean, the cash number is a little deceiving because our credit card has a high balance right now. So I take $26,000 off of that cash total. But I think as a

general statement, where we can get through the dog bills. And that's, I guess, really the question for me is, okay, we've gotten through the dog bills. We need to rebuild our cash reserve a bit. You know, now, now what do we do? I think we both kind of fell trapped for the last year just dealing with this and not being able to do anything else. Yeah. I don't want to be, like, I'm not trying to be mean about it, but you are trapped. This is, this is a choice that you have made. And then in order to fund that, you need to both continue at your job. I think a great thing for her to be working on right now is looking for more of these corporate and private clients. That seems to be a really great way. It's a high generator. You're not out there trying

to sell individual tickets to everybody. You're just selling one trip. If she could add one of those this year, add one, two more next year, you know, slowly start to ramp up. That'll cushion your cash reserve, help pay off that credit card, which we have not talked about yet. and get you to a point where she could potentially leave her job. But until that ramps up and the dog bills end at the same time, I don't see a path for her to leave. I potentially see a path, Mindy. So look, look, your situation is you have $71,000 in cash,

you got $26,000 in credit card debt. Everything else is good debt. It's all home mortgages or what I presume to be a low interest car. loan. Is that right? $14,000. Yeah, zero percent interest. That's the only reason we had a loan. Also, it's a business vehicle. So we're to be able to depreciate it. And then we'll be able to write off mileage when we're done. And just to clarify, the credit card balance that we pay it off monthly, we just had a gigantic bill for the dog this month. And that's why it's 26,000, but it'll be paid off with that cash. And is that part of the $50,000 coming up or is that part of the $60,000

recently spent? That's part of the $60,000. thousand we already spent. Okay. So here's the situation. Absent the dog, you guys are accumulate, by the way, your estimate here of $10,000 a month coming in and $15 going out is incorrect. You are clearly bringing in much more than that. You guys are bringing in $225,000 per year. So you're bringing in closer to $18,000 a month pre-tax and post-tax it'll be higher than $10,000 a month. You're also not including bonuses, right? And not including the small amount of income you do have from your trips. Is that correct? Right.

Yes. So the number of the 10,000, that's our take-home checks every month. After we, because we're putting all of our investment through our 403Bs and through the TSP is all into Ralph. So we're paying taxes on that. And then we also have an FSA and, you know, so whatever other things. So that is our actual take-home pay per month, not including bonuses or overtime or anything. And that's, so most of that's after tax and that's an allocation decision. If, if you wanted to, you could be bringing home $14,000, $15,000 a month post tax, right? So, or there are about $13,000 to $15,000

post tax. So right now, you're spending $7 or $8,000 plus the $6,000 a month for the dog or $6,500 a month for the dog. So that, that is going to go away. If we, once we factor that out, we say, okay, you have a choice here, but you're going to accumulate about $50,000 a year in cash between the two of you with your current jobs. And your job alone comes pretty close to paying off paying for your expenses. So if I take all that in mind, you're going to have in the next 12 months, $50,000 coming out of your position. That knocks your cash vision from $71 to $21,000, right? You've also got to pay off this credit card debt that puts you a negative $5,000 into the red here, in terms of the cash vision. terms of total cash. But you're going to accumulate $50,000, if you so choose, and you can allocate

that however you wish to the Roth, to the FSA, to the HSA, or to your cash position. And based on your circumstances, my thought is you just allocate that to your cash position right now. Stop the contributions for a little bit. You have a set of choices here and a set of priorities, right? You think that this business is a good idea. Your wife would rather do it than work her current job. You've got a clear path to making potentially six figures, if not the first year, in the second or third year from this business, maybe $200,000 to $400,000. And it's what she wants to be doing. So my thought is by this time next year, you can be sitting on $50,000 in cash. We're passed way beyond the dog situation. And we're gearing up for the first full season in your new business.

I don't see why you can't do that. You've got a great situation there. You cannot do that. out your 401k and have a strong cash position that's responsible to do that and buy another rental property and contribute to your FSA. You have to choose, but I don't think that's an unreasonable set of prioritization if that's what you, if that's what you wanted to do. Hey, we're going to save our dog's life. Then we're going to go and pile up cat. We're going to stop these contributions, pile up cash. And we're going to take a bet on this thing that we've been noodling on, getting starting to get semi-serious about that's actually producing revenue and that has a six-month window. If you fail next year, and you probably won't, you'll probably have a great, great success and it will

be a solid income contributor to your house, and you'll probably enjoy it a lot. But if you fail, your wife's out of work for May to October. And then she goes back, probably by September or August, if things are really bad. She won't have trouble re-getting another job in the same field, right, for within 10% of her current pay. Is that a reasonable statement? Yeah, and really, in our field right now if you can she could get a job in about three seconds. So that's, yeah, I'm, I'm surprised the year you say stop contributing to the retirement accounts, because if we did that, we could, we could sock away a ton of cash next year or this year. I just think it's a better bet right now, right? Your business idea passes my sniff test. You guys love it. You're clearly passionate about it.

You take as much time as you can and optimize your careers to the extent that's reasonable around going on these trips. You're clearly knowledgeable about them. And your unit economics are phenomenal. You spend $1,500 and make $20,000 in nine days. Let's do more of that, please. And you're probably enjoying yourself on the trip. That sounds pretty good, unless, of course, you know, accountant, Sue doesn't like a lawyer Jane, Permanendez's earlier comment here, in which case you have a fight in the middle of the woods.

That doesn't sound great. But, anyway, like your business sounds like, like that sounds like a reasonable bet to me. And what's awesome about it as well is it's an asset. It's not going to be an asset that's going to sell for 10 times profit, like a big technology company or anything. But it's an asset. If you get the business and you build a brand over three or five years, you could sell it for one or two times profit if you can get up to two or three or $400,000 in a few years. So that's an investment. The investment here is you put $50,000 in your cash position and you delay one year of 10% average returns in the stock market for that.

That's a good bet to me. I really like that compared to the other alternatives that you've got. What's your reaction to all that? Oh, that sounds great. I mean, it's, you know, I think you're right. It's once we get past the dog situation, we'll kind of be able to look at everything with a clear lens just because it's been dominating our lives for a while. But, yeah, I, you know, I really wasn't considering the option of stopping to contributing to retirement accounts just because it's, I guess, probably a non-traditional advice. that people would give.

But if we did that, I can definitely, even if she made $0 for a year, it's not like we'd be going into debt. We'd have cash and we'd be able to cash flow our current lifestyle. So that sounds good to me. So Scott just said something about your expenses are $15 or $1,900 and you're making $20,000.

Is that truly accurate? That seems a little low. No, that, yeah. Yeah, that's not, I apologize if I represented it that way. Just for getting a trip, like advertising going, it costs about that. Depending on the trip, our expenses, we aim for about 20% profit margin. So if it was a $20,000 trip, we're profiting after taxes $4,000. So to, and then if, but at the same time, if we're working, I,

factor in, you know, labor costs and things like that into it. So if, if we're working the trip, we're also getting paid, right? We're trying to build the business. So we're not, we're building a business on a job, right? So we're not vital to be at every single trip. So the way that I have, you know, kind of gamed it out is I think if we were able to have four or five private trips and then, you know, two or three public trips that are of the bigger size, that would, that would be a viable business to me, where it's making money, and there's a path forward. What's your labor fee for the trip? So if it's great, so if there's some, the trip leader gets $250 a day, a tour guide gets $200 a day.

And then if you're leading like a private trip where you have to use your own vehicle or something like that, they're getting $350 a day because we're not providing those things. Okay, so let's run through the math on a $20,000 representative trip. your favorite types that sound very profitable. How much does your wife, theoretically speaking, working this full time next year, make on a 10-day trip that's bread and butter for your business? So she would be making like as a compensation for running the trip about $2,500. And then the profit for the trip would be another $5,000. So that's like a $7,500 trip for us if she's working it without me.

If I'm working it as well, it's around $10,000. Okay, so we got $12,500 for how many people attending the trip and costs? Probably about five to eight people depending on the trip. That's $1,500 per person for 10 days. $4,000 a person. For 10 days. Okay, so it's $400 a night. So it's a really nice Airbnb comp.

What am I getting as a participant on this trip? Okay, so we have a trip coming up. We'll just use that as an example. So we're cycling across the entire Blue Ridge Parkway from Asheville, North Carolina to Charlottesville, Virginia. You know, we're carrying your stuff for you. We camp and we stay in hotels. So we provide camping gear and things like that. We provide all meals and accommodation for the duration of the trip.

And we've created a route and with things to see along the way that you're going to see the, you know, the coolest stuff along the Blue Ridge Parkway and in these mountains. as part of the trip. So that's kind of the package that we saw. I'm going to have to go on this trip to test it out. I'll let you know what I think of it. Is there a BP money discount? Absolutely. Did he say 100%?

A 100% discount? I think that's what he was going to say. You know, Scott, if I get to ride next to you and pick your brain for 10 days on money stuff, it might be worth the 100% discount. What's the name of your company? Blaze Adventure Tours. It's actually named after our dog. That's our, that's our dog, Krista. Okay. So, so $100,000 for the dog's health is an investment in branding for your business. So I think that's, oh, could that be a business expense? That's marketing fees.

That'll help. Yeah. Yeah. Okay. So, so we got, we got, what is that? $4,000 in profit on this trip, plus another $2,500 in wages for your wife, plus maybe up to $3,500, depending on if you're using the family vehicle or the business vehicle that you talked about here. So that's $7,500 per trip for 10 days. You probably have 100 days of potential in this business. So that's $75,000 in profit potential with just your wife working the business for one season. How's that for back of the nap? Yeah, that's good back of the napkin.

And the other thing, too, is we have, you know, these trips are about four to eight people. The private ones can be more. So a trip where we only have four people, we might make a little less. If we're able to put eight people on a trip, we make more. So it's really, I think the name of the game for us is getting more reach. And I think Mindy hit the nail on the head after hearing about this business for about three seconds, which is private trips and corporate trips are much more profitable and take a lot less of our time. Because, right, I have to convince one person at that company or in this group of friends that this is a really,

fun idea instead of chasing eight different people across Facebook and phone calls to try to get them to sign up. And that's where we've been spending a lot of time in a, you know, per hour, 10 cents an hour cost because, you know, you're just trying to sell. And we're both engineers and we're really, really, really good at planning fun trips, less good at sales calls. So I think Mindy, that's a very astute point is that we should move towards the private trips. But, well, let's go back a second here, right? Your maximum potential profit from what I just described is $75,000 per season. You're saying it could be a little bit more. Do you think it could be double, $150,000? And that's if you're working all 100 days of the summer, right? Yeah, probably

closer to 100. But where it becomes, I think, more profitable is when we start having guides. And so trips are running that Meredith doesn't have to be out of the house for. And I think that's the ultimate goal is that we have 10 guys and we're running 20 or 30 trips across the year. And maybe Meredith and I are at two or three each, where we have an important client or we're establishing a new route or something like that. So perfect. So that's, I think, the challenge, right? I see no reason why this seems like a good idea and worth testing, right? You're going to look back in 30 years and say, I'm glad I tested this idea, even if it goes poorly, instead of had another 30 grand in my Roth IRA at this point in our lives before we have kids and all the other stuff that

might come up next, right? For that. So I think it's a way better bet to put the cash into your savings account for the next 12 months and prep this thing and really give it a good shot next year. in my opinion, it's just a good bet from what I'm hearing. But that's it, right? How does Meredith, your wife, really dial in on the unit economics, find the profitable trips, try to get at least 50, 60 percent occupancy, right? She's going to be traveling a lot that summer, right, if this goes well, for herself, and get at least one or two guides on board for this, right?

Likely, really outdoorsy college students who can do this during the summer, for example. Right. But how do you get that and make sure that that those trips go well and that we've got good, good unit economics on this? If you got something viable, you can scale it. And then I think the other part of it is what are we going to do in the off season? There's only so much you can do to market this thing in the off season. So many, so many about bookings.

It's clearly going to be a part-time job. You can check your email once a day and book these things as far in advance as you can get. But I think that there's opportunity to de-risk the situation by finding. some sort of seasonal off-season work, perhaps New Zealand, but I think that's unlikely given the fact that you're working a full-time job. That'll be hard, right, to have one of you in Maryland to the other in New Zealand for all over the winter. So, yeah, maybe there's a vacation or something. But I think that's the game. And I think there's a clear path. I think they're getting you started with that, you'll be able to find ways to do that if you spend the next year really

honing your numbers, sharpening your pencils, and preparing your cash position for it. Yeah, I think that makes a lot of sense. And it also is one of those things for hearing you say that makes me smile. And I think when there's things like that, you know, you can feel when it's a good idea. So I like that a lot. I'm going to ask, do you have a social media presence and specifically Instagram? Yes, we have an Instagram. Okay.

on this next upcoming trip, take a ton of video, take a ton of testimonial videos, take like videos of people riding their bikes past you or hiking or whatever it is you guys are doing. And those should be your, that should be your off season work this next off season is to get good at video editing or find somebody who is good at video editing and really make it look like you have the most fun place, the most fun trips, the most fun. trips the most fun. Why would I sign up with your company versus another company? Maybe your company is the cheapest or maybe your company is the best. What makes it the best? I've done one ride and having it supported was the best. I don't want to carry my own stuff. I do a lot of hikes. I live in

Colorado. There's a lot of things that appeal to a lot of different people. Maybe somebody would want a cheaper ride that they have to pack their own stuff on or, you know, different options. I think an epic brainstorming with your wife, with some of your best guides as you're going along in the offseason could help 2024 be even better. But I like what Scott is saying. I didn't consider that you had, I didn't do the math in my head and consider that that was after your 401K contributions, which is why I said I didn't see a path for you to be. able to do this before the dog was finished. I'm sorry, the dog medical bills were finished.

That sounded horrible. This is exciting. I'm excited for you and I'm excited to go on this bike trip. When do I come out there? When does it start? Jim. June. We'll see you in them up. Oh, wait. I'm in Hawaii. Okay. I'll check your schedule. What I think is fun about this and your story and the finance Fridays in general is It's all about what you want and what the most expedient way, expedient, reasonable way to get there is. And you didn't come in and say, I want to have financial independence at the earliest phase possible or the biggest pile of net worth in my retirement accounts at age 65. You said, I want to start, my wife, I want to create a situation where, or what we got to was I want to create a situation where my wife can run this business full time and take it on from a reasonable situation.

And your situation is really strong. You guys earn $225,000 in income, probably not including the side income that you have for your business and not including annual bonuses, which I think are probably a part of this. Is there an annual bonus for you or your wife? Yeah, it's not a big number. It's probably around $5,000. But I kind of don't count that and just use it for emergencies of the pop-up. Perfect, yeah.

We've also got a real estate portfolio that's going to amortize over the next 30 years and be worth $2 to $5 million. that's a huge range, but it'll be worth something more than just today and be paid off, right? It's basically cash flowing and the payoff of your mortgage is there. So your retirement is not set, but it is, you're like way ahead of probably almost all of your peers in terms of net worth and the investing that you've done. And it seems like it's in a sustainable position.

So to me, that screams, yeah, stick it all in cash and bet on yourselves, right? All you got to do is beat a 10% annualized ROI. with this with this uh this business i i think you know odds are you're going to lose uh of half of your earnings at most in your first year um uh that that's your downside and your upside is within five to ten years you built a business that generates a few hundred thousand dollars um or a hundred thousand a couple hundred thousand dollars a year and is worth two or three times that amount so that's a good bet to me i'd make that all day over the roth and uh an index fund yeah that sounds good It's a lot more camping.

It's a lot more fun than looking at my Roth balance anyway. And then max the Roth next year. I did have, I have, I've heard you say this before, Scott. I think I have found the best HELOC in the entire world. So I'll bring that to you. It is a 15 year draw period and a 15 year pay down period. And it's for investment properties? It's for primary properties.

Okay. And which bank can you get this through? Mid-Atlantic Federal Credit Union. Mid-Atlantic Federal Credit Union. They are not a sponsor of BP money, but David is endorsing them. So go check them out. I certainly will after this episode and see what kind of options exist there. Yeah, that's how I built the portfolio with my last residence.

I fixed it up, took out a D-Lock, started buying rentals and burying them. So they were great. Awesome. And you build a nice solid portfolio in Cleveland is what you said, I think. It just says like Cleveland. Well, David, you're crushing it. Lots of good options here. We're so sorry to hear about Blaze and glad that he is on the path to recovery and you've got a good prognosis here.

We're sorry it's so devastatingly expensive and very optimistic for the future to see how this business goes. You'll let us know how it turns out and what you guys decided to do heading into next year. Yeah, we'll do. And I'll see Mindy out there pretty soon, right, Mindy? Yes. Yes, I'll be the one that looks like this. All right. Thank you, David.

Thank you, David. We'll talk to you soon. Thanks, guys. That was David, and that was kind of exciting. But Scott, I think we do need to address the elephant in the room or the giant dog vet bills in the room and talk about pet insurance. I think it fundamentally comes down to a choice. It's either you're one of those people who can set a limit and say anything over to this amount and I'm not going to fund it. And, and sorry, and plenty of pet owners have that mentality. nothing wrong with that. That's how some people choose to approach that relationship. And other pet

owners, probably like my wife and I, there's no, there's no limit. Fred, our kitten, who were smitten with, well, you know, had an issue and we spent $3,000 to resolve that issue. And so if you're in our camp and probably would be willing to spend whatever it took to restore the health of your family remember, you got to have insurance that can cover it. We didn't. Luckily, it wasn't $100,000, but I'm excited to learn which insurance to pick, because that makes a big difference. And with that, I'd like to welcome Kalin, our producer, onto the show. Kalin, can you give us an overview of the options that pet owners have with insurance, what you've chosen personally and where you'd advise cat and dog owners, for example, specifically to look in that world?

So I actually just got a very sweet corgi puppy. So this sent me down the financial rabbit hole of how do I best position myself and having a new family member. So the backstory here is that my boyfriend has a special needs doggo. And so Zoe has had, she's like a $30,000 dog at this point. And so he's only had to pay 10% of that because he chose a really great pet insurance. And so it really varies between breed is what I learned and age. And if they're a mixed breed versus I'm a pure bread, I do have a pure bread Pembroke, Welsh corgi.

So they are a little bit more expensive. What I found is Trupanion is great. The one that I ended up choosing that I found the most cost effective was healthy paws. And for Walter the corgi, it's $60 a month, $250 deductible. And it covers 90%. of his vet bills. So that's a pretty substantial amount if he ever were to have an issue like our other dog has had. So I highly recommend it to people. You can just go in and do a lot of researches. Pumpkin is good. Truponion is good. There's a lot of them out there. I just found that one to be the most cost effective. I just want to let everybody know, the cost will go up if your dog is older. And so if you're just getting your pet, pet, and sure, and let's say they're six or seven, that is factored in because that dog is going to have more issues as they age.

Kaylin, our guest today said that his original pet insurance plan had a cap. Other than a cap, is there anything else that listeners should be looking at in pet insurance? Yeah, that's actually a really good question. So other plans may cover things like dental or it may cover part of wellness visit. I looked into some plans that actually did have that. I found that I did the math on it and it was an additional like $30, $40 a month to have that factored in. And if you look at it, you look at the cost of a vet visit, it didn't math out over the course of the year. So for me, the biggest thing to look at is an unlimited cap. What do you want your deductible to be? And do they actually pay the vet or do they or do you have to

fund it and then they pay you in a week or two. I end up choosing the option that I would have to pay out of pocket for and then they pay me back versus someone directly paying the vet. But that's because it was less per month and it had all the benefits of an uncapped max. Awesome. So it's like shopping for any other type of insurance, but perhaps a secret liability or something that is building for many millions of pet owners out there that they're not considering. And look, you got to know yourself there. Are you the type of person he's going to say no to a bill like what Blaze had or you're the type of person who's going to say yes. And you have to factor that in. And you might want to, if you're on the fence, be conservative and go with the, I'm probably the person who's

going to, you know, pay to save my dog's life things. I think in the moment that will be very hard for folks. So at least that's how it would be for me. And like just think about it. Like you've chosen to take on this liability and additional responsibility in your life. So it's up to you to figure out what type of life you want that pet to have. And I think 60 bucks a month, 80 bucks a month, you know, put pet food on top of that. What's that $100 a month? $120. I don't think that's a big ask to extend the life of your pet. Great. And we have no financial affiliation as far as I know in any capacity. We have never talked with anybody from the insurance provider that you chose. So this is not an ad. This is just a discussion amongst the three of us. So that may change in

the future one day. We don't know, but that's not something that we have any ongoing relationship with. so much, Kaylin. Pet owners, you're encouraged to go look at insurance. Healthy Paul is maybe a good place to start or to include in your search for that so that you don't have a situation like David's. David is very fortunate to have the means to be able to cover this in cash flow within the next year and still move towards his financial goals of starting a wonderful trip business. Other folks, this could have been devastating and set him back a much longer period of time. All right, Scott, should we get out of here? Let's do it. In honor of Kalin's cute little corgi puppy who looks like one of those blowdried cows, I will say that wraps up this episode of the Bigger Puckets Money podcast. He is Scott Trench and I am Mindy Jensen saying bye for now, fluffy cow.

That was a very moving outro, Mindy. If you enjoyed today's episode, please give us a five-star review on Spotify or Apple. And if you're looking for even more money content, feel free to visit our YouTube channel at YouTube.com slash. Bigger Pockets Money. Bigger Pockets Money was created by Mindy Jensen and Scott Trench, produced by Kaylin Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the Bigger Pockets team for making this show possible.