BiggerPockets Money Podcast - 523: Americans Say THIS Is How Much You Need to Retire (More Than You'd Think)

Episode Date: April 26, 2024

Is a six-figure salary enough to achieve FIRE? If you’re working towards financial independence, you know that any extra money at the end of the month can help propel you to your goals faster, but with inflation eating away most, if not all, of your paycheck, what do you do? If you want to reach early retirement, do you need a massive salary to save you from the high cost of rent, food, gas, and other everyday essentials? Or, can you easily retire with a $100K/year incomeif you make the right moves? Let’s find out! Today, Scott and Kyle are reviewing some of the hottest headlines in the world of personal finance and giving you their honest opinions. First, we talk about whether or not a six-figure salary is enough to achieve the “American Dream,” and if it isn’t, what YOU can do to make the most of that money. Then, we venture to a debate that everyone has an opinion on: should you withdraw from your retirement reserves to buy your first primary residence? Is this a smart money loophole or a move that could cost you in the long run? How much do you need to retire? According to Americans, the figure is close to $1.5M, but is this actually how much a smart saver or spender would need? Plus, we talk about the one generation on a surprisingly great track to wealth in retirement (it’s NOT the boomers!). Finally, are you fed up with guilt tipping? Don’t want to pay an extra quarter of your bill every time you go out to eat? Join the club because we’re discussing how tipping is getting out of control. In This Episode We Cover Whether or not a $100K/year income is enough to achieve the “American Dream” Using retirement funds to pay for your primary residence (when NOT to do this) How much Americans need to retire, and ways to retire with even less The one real estate investment ANY young American should be making today Why younger generations are on track to retire rich and achieve FIRE Tipping culture and what percentage we press when the payment screen turns around And So Much More! Links from the Show BiggerPockets Money Facebook Group Network with Other Investors on The Path to FIRE Through the BiggerPockets Forums Finance Review Guest Onboarding Join BiggerPockets for FREE Mindy on BiggerPockets Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Money Moment Find an Investor-Friendly Agent in Your Area Find Investor-Friendly Lenders Grab the Personal Finance Classic, “Rich Dad Poor Dad” BiggerPockets Money Podcast 344 - Rethink Social Security: Myths, Benefits, and Clearing Up Misconceptions Articles from This Episode: $100K/Year Withdrawing from Retirement How Much to Retire Gen Z’s House Hacking Guilt Tipping Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/money-523 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello and welcome to the Bigger Pockets Money podcast. I'm Scott Trench and with me today is my co-host, Kyle Mast. How are doing today, Kyle? Hey, Scott. I'm hoping to jump in today with you and just have a great show. We are so excited to bring financial independence to everybody, make it less scary for everyone to introduce everyone to different money stories because we truly do believe that financial independence is attainable for everyone, no matter where or when you're starting. We've got a great episode today, everybody. we've rounded out some of the most interesting personal finance headlines, and we're going to dissect them one by one, which has some really opinion-y ones as well. So this should get interesting,

and hopefully Kyle and I will disagree a few times. Yeah, this should be really good. We're talking salaries. Is $100,000 salary even enough anymore? What can you do to reach financial independence and retire early, even if the cost of living is going up? That and so much more is coming up on this episode. So it's going to be a lot of fun. So stay with us. Awesome. Well, let's jump in. All right, first headline today is from CNBC, why a $100,000 income no longer buys the American Dream in most places. And the American Dream is defined here as what we all picture, owning a home with a white picket fence high on a hill, having a family, going on vacations, and one day being able to retire in comfort. So some of the key points from this article, 52% of Americans surveyed by CNBC say they would need more than $100,000 a year to be comfortable. A go banking rates report that used the 50-30-20 framework and applied it to a hypothetical family with two adults, two kids, a home and a car, found that in all 50 states you would need more than $100,000 to apply the 50-20 rule.

And in 38 states, you need $140,000. Wages have not kept up with costs in the past 50 years. And Americans are saddled in debt with $1.8 trillion in student loans and $1.1 trillion in credit card debt. So, Kyle, can you react to this? And also, would you mind framing what the 50, 30, 20 rule is in this context for folks who are not familiar? Yeah. Basically, just real quick, the 50, 30, 20 is, 50% is like your, of your budget is your main necessities. 30% is discretionary.

20% is what you save. And that's a very broad rule, you know, the rule of thumb is from a budgeting standpoint. But that's what they're using here. It's not something that, like, me or Scott are actually saying we would apply. that's what this article is thrown in. My first reaction right off the bat is that, yes, $100,000 obviously does not buy what it used to. I think that's a pretty obvious thing. And I think that's pretty easy to back up with a whole bunch of data. And that's just the nature of inflation. But what do you think? Yeah, you know, I, well, first, I want to gripe about the American

dream, right? Like, I, that is not my, my dream. And I think that that dream is shifting a little bit. I think that the dream for many is now moving towards a financial independence space. That might just be because I'm in this bubble of the fire community and here at bigger pockets. That's what most people are looking for. But it seems like it's a real thing and is a trend, especially among younger generations like Gen Z and millennials, that that is really the big goal, not just to have the house in the hill, but also to achieve financial independence with that. And, you know, I think that $100,000 a year is a great way, is a great. start. It's an excellent amount of income to save if you're going to be very aggressive about it early in your journey. It's not enough to get ahead with if you have a family, if you have kids,

if you want to live in a nice, comfortable area and send your children to good schools, for example, and get ahead. You will have to generate more more income than that. But for someone who's trying to get ahead and maybe starting from a position like that without those burdens, if you're willing to make big sacrifices, you could save $30,000, $40,000 a year by living well below your means, probably in most places around the country. You will not be living at the median level, right, with peers that would be making that. But, you know, when I started my journey as a single person making $50,000 a year 10 years ago, that was enough to really save up $20,000 a year with significant sacrifices.

sacrifice. And so I think it's all about perspective, right? Take the two and a half kids and a dog and the good school district and those demands. No, $100,000 is going to get you by and you're not going to be getting all the things you want. You might be able to have the picket fence, the house of the picket fence, but not in the good school district. You might be able to have a nice car, but not the nice house, right? And you're going to have to make tradeoffs at that level. And I think that's the reality of what's going on in America today. Well, I don't like it when an article puts people into a box and says, you can't do it if you don't make this amount of money. Because I've worked with enough clients in my financial planning firm, I didn't work for the most part super high net worth clients. I worked with some,

but not many. Most of them were middle class. I mean, and I would say middle class, you know, maybe some upper middle class. And I had clients that had better money habits than people that made half a million dollars a year and saved more, had more assets because they knew how to manage it. They knew how to find happiness and joy in small things, in things that were important to them. So I, you know, that's what I would just encourage people. When you read something like this, don't get discouraged and think, man, I make $66,000 a year. I'm going to be stuck forever. That is not true.

You know, that is definitely not true. Don't read this and think that. The other thing that I would say, the biggest thing that I would say when I read this article that jumped out to me is that we all need to know the water that we're swimming in. And what I mean by that is that we are swimming in an inflationary economy, an inflationary world economy. Our world economy is built on central banks and inflation and how they create monetary policy. And I know that's a lot of like monetary mumbo-jumbo coming out real quick.

But what I mean by that is that you need to understand that your buying power is going to go down over time. So you need to adjust your investments, your savings, your lifestyle, your financial plans to account for inflation and that your $100,000 salary is not going to buy the same amount next year as it does this year. So what are you doing? Are you buying something that inflates over time naturally? Play the game that the government is giving you to play. Don't play against them. So make sure you have some sort of inflationary hedge as you're going forward, whether that's investments, whether that's some sort of commission deal with your employer that is adjusted for inflation over time. There's all kinds of different ways, but just know that that's where we live.

You need to be aware that that's the monetary environment that you're in. It hasn't been that way always in history, but that is definitely the world we are in for the past 100 years. And it doesn't seem like it's going away anytime soon. For me, the way that I wanted to, like I thought when I started my journey towards financial independence at 23 graduating from college, this was kind of instinctive, right? Like, how do I save as much as I possibly can and put it to work immediately so that more, most of my, most of my income will come from my wealth as early in life as possible? And again, $100,000 would have been, you know, even adjusted

for inflation over the last 10 years, would have been way more than enough to kickstart that journey for me as an individual at that point in time. But again, it would be very, very important. very difficult today with my wife, baby, and perhaps more family members down the line, that would be very, very difficult. And I think that's what the article is not appropriately sussing out is that for different people at different stages, there's different amounts of income that are appropriate and enough. All right, now that we've covered the new value of a $100,000 salary, when we come back, we're going to answer the question, is renting smarter than buying a house? Stay tuned.

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We will be discussing the record high number that. Americans think they need to retire. But first, we have a headline discussing borrowing from your 401k and using that to buy a house. And if whether that's a good idea or not. Headline two, is it a good idea to borrow from your 401k or IRA to buy a house? This is from USA Today. And the article kind of lays out why you may take out money out of a retirement account to put towards a down payment and what the consequences are. Some of the key points.

Bank rate survey show that 9% of people have dipped. into their retirement funds to buy their homes. People between 18 and 27 were twice as likely to do it. Straight withdrawals from before 59 and a half are generally a bad idea, according to the article, because a 10% penalty would apply in addition to the taxes on the amount taken out. Traditional IRAs allow you to withdraw out $10,000 without penalties for a first time home purchase. And I would add to that Roth IRAs have that same rule also. But you're still going to pay the taxes on a traditional IRA, not a Roth IRA. With 401Ks, you might be able to borrow 50,000 from your account, and this depends on the plan documents of your current employer, where you

actually need to repay it back what you've borrowed, plus some interest, but you avoid the taxes and penalties of actually withdrawing that money without a loan in place back to your employer. Scott, I mean, what jumps out to you first? We got a lot we can cover here, but what's your first thoughts on this article. Yeah, well, look, I always like to start the discussion around housing by reminding everyone that a home is an expense, not an investment. Right. So the way we need to think about housing is like, you know, if you're invest, if you think your primary home is an investment and you're trying to move toward financial freedom, something is wrong. It can be part of your net worth, whatever, you know, there's discussions. But the more house you buy, the less

long-term wealth you're likely to accumulate. So it's not the same as buying a rental property or buying, you know, that's intended as a true investment or buying a stock or anything like that. It is, it is how can I afford the lifestyle that I want? How can I achieve a lifestyle I want most affordably here? Right now, in most places around the country, it is cheaper to rent than to buy unless you intend to live in the place for a very long time. Let's call it 10, 15, 20 years. You have to assume that appreciation is going to be very high or that you're going to live in a property very long to offset the transactional cost and the much higher mortgage rates or the high relative, the huge jump in mortgage rates relative to rents in many areas around

the country. So from a pure financial standpoint, I think that many people, maybe most people, will find renting attractive to home buying. And that's totally fine. You're not behind if you choose to rent rather than buy. That said, at different stages in life, certain people want to own their home, right? That's me right now, right? 2024 is rolled around, and I said I've house hacked for the last 10 years or rented,

and I want to live in my home forever. That is, or not my forever home, but the next 20 years home where my kids will grow up, my child will grow up, right, and we'll raise a family. So I bought a home. I probably would be much better off financially renting over the next couple of years, unless I actually do live in that place for the next 15 to 20 years, which is my current plan. To answer the question, the article's question about,

should you borrow from a 401k or Roth IRA to buy a house? I think that's a mistake. I think if you're going to buy a forever home, that you should be saving up for it outside of these other vehicles and knowing that this is an expense, not an investment, going back to that 50, 30, 20 rule, right? I'm going to take some of this and put it towards my future house. but I'm going to take other parts and truly invest it. The exception would be house hacking. House hacking can often be a much more powerful way to build wealth than leaving money in a 401k.

And I absolutely, I would absolutely go back until my 23-year-old self to prioritize buying a house hack over putting money into a 401k or Roth IRA. I just want to react to Scott's comment on the house hacking piece. That didn't even jump out to me in this. And that's just huge because that, if there were any at times, to pull out from a retirement account to buy a primary residence, that would be it. Because the amount of returns that you can get on that type of move. So let me paint a picture.

So if you draw out, say, $10,000 from an IRA to be able to put a down payment on a house, you know, like a 3% down loan that you can get out there on a house that you turn into some sort of house hack, renting out rooms, renting out another unit, converting the garage, whatever you do, but you turn that into income, the return that you're getting on that income, as opposed to what's in the 401k or the IRA that you draw it out from is going to be substantially more. And I would argue that, and this is not me saying do this, but you're going to, you're going to even overcome a penalty, a 10% penalty that they hit you with by quite a large margin in that instance. So if that's your only way to get in and you're serious about investing, that's a great way to go about it.

I would say there's nothing to really be worried about that. Just make sure you're buying a good investment property. Everything else applies in that scenario. But wow, I mean, that would just be a great way to get started. Back to like the renting, you know, the renting piece versus buying. The gap that Scott was talking about that there is right now between renting and buying is just so huge. And the interesting thing is that it's if you were to become a buyer now, it's not that big between the people that already bought and have these low interest. rates and have the low mortgages from, you know, three years ago before the interest rates started

going up. And that's what's changed, that interest rate and the fact that housing prices have not come down to adjust for the high interest rates. So that gap between the rental cost and the ownership costs has widened so much. And one thing that people don't think about, and I feel like I'm now saying don't buy a home, but that's not what I'm saying. I'm just trying to make people realize buying a home is an expense like Scott talked about. You do have property taxes. you do have insurance, but you have, you have plumbing that goes out. You have sewer that goes out. You have a septic that goes out. You have a water pump that goes out. You have a lawnmower that breaks. You have, I mean, it is endless. When my wife and I sold our first home, we actually rented for a while,

and we loved it. We just loved it. I think we rented for maybe 18 months before we bought another home. And the dishwasher would go out. And that was part of, you know, we call it up. And a day later, it's fixed. or there was a new one. Same with the fridge. And just from a flexibility standpoint, if owning your own home is not an important thing to you, I would say not to do it. And that's not saying don't invest in real estate

because I definitely think you should do that and continue to be smart with your money. Don't use renting as a license to spend everything you have. But if it's not in your dream to own a home, there is nothing that says you need to, in order to be able to retire early or even retire normally, at some point or just to be financially stable. That depends on your financial habits, not whether

you own a home or not. All right. Our next headline here is from USA Today. The amount of money Americans think they need to retire comfortably hits a record high. Key points from this study are that a study released recently shows that Americans now think they'll need $1.46 million to retire comfortably, which is a record high and up from a similar study in 2020 where the number was just $951,000. That's a 53% jump in just four years. And a couple of key takeaways. Gen Z started saving for retirement at age 22. Boomers said they started saving at age 37 and millennials began at 21. Gen X also mainly think that they're going to live until 100 years old and that Social Security will end in their lifetime, causing them to have to get an earlier start and saving.

The study also found that when people are thinking of their retirement amount, they're not factoring in any taxes into that consideration. So what do you think, Kyle? What's your reaction to this set of key takeaways in this headline? Well, the first thing I think of is just the incredible impact of the fire movement is like I look at these numbers from the Gen Z, the Gen X, the millennials, and the boomers. And, you know, Gen Z started saving for retirement on average at age 22. And, you know, we have to take these with a grain of salt.

We don't know exactly what that means. You know, are they just doing like a minimal match at their employer, which, in my opinion, doesn't move the needle that much? It does help. And starting that early does help. But you kind of need to get more aggressive than that. So we don't know. But it's interesting to me that Gen Z has grown up with an additional message that the boomers

did not have this financial independence, retire early, or flexibility message, the Gen Z, they grew up hearing that there are some people that are retiring at age 30 or they're switching to their librarian full time or half time because that's what they wanted to do because they saved a whole bunch in the first 10 years of their working at their $50,000 to $100,000 job and they saved it up. They bought a couple rental properties and now they can work a $40,000 a year job to supplement their investments. So this is this is a message that they got that, Gen X didn't get. The millennials got a little bit and the boomers didn't get. So it, in my opinion, I think it's impacted how people are saving. And you throw into that the scare of losing Social Security

or quote losing Social Security or minimizing it over the years. And that that plays into it for sure. Yeah, what else do you think, Scott? That's my initial kind of fun reaction. One of the things that the article calls out that I found really interesting was there like, an article portrays this in my view as like kind of a gap between expectations and reality, but they said that Gen Z has $22,800 saved up for retirement and think they'll need $1.6 million in retirement and think they're on track to get there. And it makes it seem like, oh, they're not on track. But like, they are on track. Gen Z is from 12 to 27, right, as a 2024. So if you're listening to this podcast right now in the weeks after we record it, the Gen Z population is between 12 and 27,

and their average amount they have saved for retirement is $23,800. And if they just save $250 a month for the next 40 years, they're going to come out with $1.4 million towards retirement. And they're probably going to do better than that over a long period of time or have every bit of potential to be able to do better than that. So I think this generation is going to do very, very well. And that's before any, you know, and they're not assuming anything is what I'm hearing. No social security, no government benefits, no inheritance from,

family or, you know, parents or other relatives. So I am very bullish on the Gen Z age bracket and think that they're going to be in pretty good shape. Not all of them, but as a generation, I think this is going to be a very strong one. You know, jumping down a little bit more, just the actual numbers that people are throwing out there, you know, like these five numbers, the, you know, 1.5 million, 900,000, 500,000, what does someone need to retire on? And as simple as that sounds to just throw a number out there, it just does not work that way. It is not that simple. And thankfully, it's not that simple.

And what I mean by that is if it was always just, you know, one size fits all, if life throws you a curveball, you can't adjust to it. So if you need $1.5 million to retire and have $60,000 in income, you know, we're not talking about taxes, anything. You know, we're talking about 4% rule kicking it out, $60,000 a year indefinitely. for your retirement income. You know, that's an easy way to look at something, but you're missing so much of the picture. Like, what do you want to do when you retire? Do you want to sit on your duff and do nothing?

Do you want to rent out your garage to people as they come by? My parents have a Christmas tree farm. Excuse me. They have a hazelnut farm now. So they have hazelnuts, and they love to RV also. So they have, this is called a boondockers welcome. It's like this community of people that you can allow. people to stay at your place and just host them. And they're, you know, essentially retired.

My dad still farms because he loves it and probably always will. But people need to think about what do you want to do in retirement. And what they want to do is like host people and talk with people and be hospitable. So in retirement, do you want to be hospitable? Do you have an extra room that you can rent out as an Airbnb? Do you have an extra part of your house that you can rent out when your kids are gone as an Airbnb? Your FI number, your financial independence number, can be a whole lot lower. There's some risk there, knowing that you need to produce this income

in a different way, but there's nothing wrong with that. I mean, that will actually probably let you live longer if you're doing something you love sooner rather than later. So it's just not, it's not as simple as save $20,000 a year into your 401k until you hit $1.5 million and then quit your tech job and ride off into the sunset.

It's not that easy. It's not that boring either. It's a lot more fun than that. that. Yeah. And then, you know, I'll just throw out there that, look, one, one, one, one, one, four six million, that, those are numbers, right? Like, it comes down to how much is enough for you? What do you want? And, you know, we always, I always go back to the four percent rule. If you want to spend $40,000 a year, you need $1 million, right? You can withdraw all four percent on a 60-40 stock bond portfolio. They have a very high probability of not only not running out of money, but also seeing

your portfolio grow over the following 30-year period. You want to spend $60,000? That's $1.5 million. So people want to spend $60,000 a year now, apparently on average, according to the survey. I like that that's a very reasonable target for a Gen Z or millennial. I think to hit over a lifetime, it may be a little out of reach for Gen X or baby boomers who are just getting started. But that's not a surprising or, I think, scary number for folks who are, again,

earlier in the careers these days, earning around the median income. Yeah, and another piece to the puzzle, too, that the article touches on a little bit, and people overlook all the time is the tax situation. Like, how much of the money do you keep? You know, what is your money invested in? You know, you're talking about, say, let's go with a $1 million number for $40,000. You know, that's too low. Let's do $1.5 million for the $60,000 income, just so people can kind of picture that a little bit more.

You know, are you going to keep all that $60,000 that comes in? It depends. It depends on what you're invested in. Is there capital gains on it? Yes, but you're probably going to be in a marginal tax bracket that allows you to not pay any capital gains tax on it. It just depends on what your other income is. It depends on what type of investment. I mean, real estate, bigger pockets.

There's a reason why real estate has built so much wealth, especially in the United States, over the decades. The tax system is just tailored to real estate in a way that it isn't to just about anything else. And it's because the government knows that it drives an economy. It drives jobs. It drives a lot of things. So incentivizing it is to the benefit of the government. They're not just giving away free money and deductions for no reason. There's reason behind it all. Again, swim in the water that we're in. You know, know what we're, what system we are in and use it to your advantage. You know, when you're drawing from different accounts, strategically draw from Roth accounts, traditional accounts, in a way that you fill up certain income tax brackets.

There's ways to do this. And also, you know, Social Security, I really don't think it's going to be gone. I think it's going to be different, but it's not going to be gone. And you need to know that system. I can't tell you how many clients have gotten it wrong with drawing social security as a spouse, as a surviving spouse, as a, you know, delaying it until age 70. there's all these rules and you have the responsibility to know the rules, especially as this system changes in the future. We did an episode on this, um, a year or two ago with Jeremy Kiel,

um, about whether social security is running out. And like, it's not running out, right? Like, it's, it's not like, oh, social security. So, so yes, the social security system is unsustainable, um, in its current form in a truly long term sense, unless certain things about the population and demographics change. But that doesn't mean it's going to go from like whatever, you know, current retirees get millennials and Gen Z get nothing. It'll be some percentage of it and it'll be most of it, right, if the program continues. And so that is a much more reasonable thing to expect. I love the fact that Gen Z millennials are not planning on any. That is, that is wise. That's how we should plan. But what's probably going to happen is that most of the Social Security benefit, if not all,

will be there at the time that we retire. So I think that that's a better way to frame the discussion around it and think through it. And I think that's a great call out on the social security piece. All right, we're going to take one more quick break, but stick around. You won't want to miss this last headline about tipping culture and how it's gotten completely out of control. 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.

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Welcome back to the Bigger Pockets Money podcast. We're talking about American tipping culture and how I always give in to it. Before we get back to the episode, I need you to do something so that you're not missing out on all that value you can get from this show. If you don't want to miss out on any of the life-changing tips that you hear every week on Bigger Pockets Money, go right now into your podcast app and click into our show page and hit the follow button. Now that you've done that, let's get back to the show. Please do follow us. It really makes a big difference and helps get the word out about Bigger Pockets Money and lets us know that you like what we're doing. All right. Headline number four. Here comes a good one. Guilt tipping is getting out of control,

but signs show consumers are pushing back. This is from CNBC. And you know what we're talking about here, where you come up to the cash register, they flip the thing around and it's like 75% tip on top of there and they expect you to just hit the button. That's what we're talking about. Okay, maybe not 75%. I've never seen that. I've seen 30. That's the highest I've seen. Studies show that since 2020, tipping culture has been more invasive. There is now a soft. software like Square where you pay using an iPad and you're automatically prompted for a tip. But generally there's a real tipping push that has been happening here in this country, but has really just blown up in recent years.

So let's get into it. Scott, what do you think? Kyle, I'm looking forward to seeing if you're as generous with your tipping as you are, have been with your tips today so far in the other sections we discussed. Nice. Nice. No, I think that, look, this is inflation, right? That is what it is. This is inflation that's not going to show up in the official CPI report, but it is absolutely there. And instead of raising prices to deal with the higher wages that's going on, lots of places are asking customers to take care of the costs of employees. That's how they're able to pay. Whether or not they're changing wages for employees, those employees are getting more compensation in doing this.

And it's annoying and it's a bad experience, I think, for the customer because you're faced with a decision each time you do it. And look, for me, like, it's just so qualitative. I'm sure everyone's going to have an opinion on this. But like, I'm a busy guy. I got the big title here at Bigger Pockets. I got a little baby. I got a wife. If someone flips the freaking screen around at most places and it's not takeout,

like I'm not actually just picking it up, I pay the, I put in the midpoint usually of the tip and they get the money out of me because it's just easier. And it's, I don't want to, I don't want to have to deal with that experience. That's probably a whist thing for me and I'm probably going to get beat up, rightfully so. in comments on this, but that's how I view it. What it does change for me, though, is I go more frequently to places that don't put me through that experience and I don't come back to the places that do.

So I've been eating a lot of Chipotle lately. I don't get that at Chipotle. I don't have that decision faced there. And I also am more inclined to just go and sit down to the restaurant, right? Because if I'm going to get breakfast, like, why don't I just take my computer and get a meal that's brought to me if I'm going to pay tip on the meal anyways for that? So that's how it's changed my personal behavior in this. What do you think, Kyle?

Yeah. I mean, I just, I think maybe I'm just old fashioned in it. And we're, Scott, we're both going to get beat up in the comments. It doesn't matter what we say on this one. Like, this is such a red hot issue. But I, you know, when I was in college for the summers, I worked at a resort. And I worked in golf. I worked in valet.

I worked in bell service. I worked at the front desk. We did all these different jobs. It wasn't like a hotel. in a very high-end city where tipping is just a given thing. But I remember how exciting it was to get tips when you do a really good job, like an exceptional job. And some people would give really good tips, you know,

like, you know, several hundred dollars all of a sudden for just doing something that you thought wasn't all that. I remember one guy left his wedding ring in his golf cart and they were having a business meeting at like 8 p.m. in the evening. And they called and we ran and like went through all the golf carts and found it and gave a huge tip for it. But when I think of tipping, I think that experience has shaped what I think a tip should be given for. I think they should be generous.

I think they should be non-gilt-ridden when a job is done exceptional. I don't think that they should be assumed and I don't think that they should be given for a normal job. I think a normal job should be paid for by the employer and the employer should adjust prices accordingly. but, you know, we are in this weird transition time that you made a really good point on inflation of the employers kind of pulling at this inflation lever, but not trying to pull too hard on the customer and maybe the customer doesn't feel it as much from the tipping, but now the customer is feeling it and starting to resent it. So I would say, you know, when they flip the screen around, I'm more inclined for the no tip. Oh boy, someone's going to throw me in the comments

to hit no tip, but I am also much more inclined when someone who does. just a phenomenal job to do a clip, a tip that, you know, would pay for like 20 coffees or something. And I just think that's a much more fun way for me to live in the experience of tipping people and have an impact. And, and I think we'll go also, another thing that, you know, is thrown into some of these stores is, you know, will you do, will you round up for the children's hospital? And here's another one where I'll probably get ripped in the comments, but I am very intentional. me and my wife are very intentional in our giving and we give and we will give where we decide to give. So I say no to all of those things too.

And that doesn't mean that other people can't say yes to them. I mean, that's great. There's nothing wrong with that. That's something that you want to give to and you don't have to think about it. That's awesome. I love vetting an organization and knowing people that are like on the board of an organization and being involved with it and doing that. And so it just makes for me it's an easy no because I know I've got a priority.

and that's where I'm giving. And this might be someone else's priority. So that's fine. But yeah, any other thoughts on that piece, maybe, Scott? I agree completely with the giving piece right there. Like if I'm going to give money, I'm going to give it an intentional way that I think is going to do good for a cause that I really want to support. And so I have no problem saying no to those prompts on the, you know, grocery store checkout

or whatever it is where that comes up. It's for every reason a lot harder for me to, you know, someone has made a sandwich at, you know, subway or whatever it is to just put a zero on the screen there. And that's how, like, that's just how my personal experience goes for that. And so I generally say yes to that one and no to the giving. Probably shouldn't. Maybe there's a different way to frame it. I'm probably contributing to the problem. But for me, it's a tipping by government fiat. Oh, you like that one? Oh, yes. See what I did there? Yes. Oh, man. Yes. Yeah, this is a tough one. You know, And I would say to, you have to be careful to, like for myself, I would say I have to be careful to not be too judgmental in my my approach to.

You know, like if I'm choosing, oh, they didn't do a good job. I'm going to do no tip. You know, I have to be careful about that. You know, that's something that I have to make sure that I'm not assuming certain things about certain people that I assume they should do more to be able to earn the money that they do deserve. But for me, it is just a fun experience to be generous in big ways instead of like, I guess, little droplets along the way maybe. But the little droplets make a big difference, as we know from investing too. Awesome. Well, Kyle, thank you for all of the tips you provided today.

This was a very fun discussion. Really enjoyed it. And that's all we have, I think, for everybody. Where can people find you in the next couple of weeks until we do our next one? Oh, man. If you're ever looking for me, I've just, I've got a website. Kylemask.com. I do some writing there, but not a ton. Nothing fancy. You probably won't hear from me very much. We're on the road in the big RV. The kids are napping in the parking lot with

my wife reading in the RV while I'm in the library podcasting with Scott about tips. Well, that wraps up this episode of the Bigger Pockets Money podcast. He is Kyle Mast and I am Scott Trench saying, see you next time. Bigger Pockets Money was created by Mindy Jensen and Scott Trench, produced by Hajar Elda. Edith. Edited by Exodus Media, copyrighting by Nate Weintraub, and lastly, a big thank you to the Bigger Pockets team for making this show possible.