BiggerPockets Money Podcast - 563: Why Aren’t More “Normal” People Achieving FIRE?

Starting point is 00:00:00 Scott and I have been getting very thoughtful, very helpful feedback from Bigger Pockets Money listeners. We've thought of BP Money as a show for those aggressively pursuing early financial independence, true fire. But some of you are saying that you want normal personal finance. Today, Scott and I are going to have a heart to heart about fire, whether this show should open up to more mainstream America or stay true to the fire roots we've grown from. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and with me, as always, is my fellow Fire Path Journeyer co-host, Scott Trench. You know, Mindy, it's just been, I've been really getting tired of trying to figure out good puns in response to these intros. Then I got excited about it, and now I'm retired.

Starting point is 00:00:50 All right, Bigger Pockets has a goal of creating one million millionaires. You are in the right place if you want to get your financial house in order because we truly believe that financial freedom is attainable for everyone. no matter when or where you're starting. But as we'll talk about today, there are a few big strings attached. Today, we're going to discuss why Mindy and I started Bigger Pockets Money four or five, six years ago now, why, as we've grown, we've seen more and more interest from folks who are looking for normal personal finance. And whether we're going to pivot to that broader personal finance category or whether we're going to stay the course as a show about financial independence, and early retirement.

Starting point is 00:01:30 Before we get into the show, we want to give a big shout out to our show sponsor. This segment is sponsored by Bam Capital, your path to generational wealth with premier real estate opportunities. CY. over 1,000 investors have invested with Bam Capital at biggerpockets.com slash BAM.

Starting point is 00:01:45 That's biggerpockets.com slash BAM. Now let's get into it. Scott, first of all, I have to correct you and say, this is our seventh year of Bigger Pockets money. Seven years. Wow. Seven.

Starting point is 00:01:58 seven years of bigger pockets money. Woo-woo. And we have a Facebook group. I'm not sure if you are aware of this. If you are not, I would like to join in on the chats. It is Facebook.com slash groups slash BP money. And the reason I bring this up in the beginning of the show is because we had a recent post asking us to have different conversations on the podcast.

Starting point is 00:02:22 Scott, do you want to give a kind of a paraphrase of this post? Sure. Mark provided really wonderful feedback in our. Facebook group about how he loves the Bigger Pockets real estate podcast and BP Money and how he's listened to almost all of the episodes. But he's frustrated because he lives in California with a single income with five kids and hasn't had a chance to really take part in the big boom for a lot of asset classes that we saw from the period of 2010, 2007, 2010 to 10. 2004 here, 2024. And he's asking, like, is there a way to have more personal finance content

Starting point is 00:03:06 that is more maybe relatable to someone in the position that's not really, that's not in a position to save 20, 30, 40, 50, 70% of their income? And how can Bigger Pockets Money better serve someone like Mark? And there's 80 comments. There's a lot of people who want this type of content from Bigger Pockets money. And it's really challenging some of the core, I think, beliefs you and I have about what bigger pockets money is and should be and what we should be doing because people really like the content around normal personal finance that isn't about going after early financial independence and the fire movement. Mindy, what do you think? What's your reaction to this request?

Starting point is 00:03:46 I can completely empathize where Mark is coming from. The content that we're sharing on our show right now isn't his story. But if you look at his story, he lives in a a high cost of living area. He doesn't have a high-tech pay high-paying tech job. He has five kids. These circumstances are going to conspire against him reaching early financial freedom unless something changes. The five kids isn't going to change. Maybe the stay-at-home mom can change. Maybe the high-tech job can change. Maybe the high cost of living area can change. But Scott, Do you think we should be making more content for people in this more normal set of circumstances? Yeah, you know, I think it's a really good question.

Starting point is 00:04:33 And I grapple with it a lot because the mission of bigger pockets, the mission of bigger pockets is that we believe financial freedom is attainable for everyone, no matter when or where you're starting. I think that the problem that Mark is running into is that, you know, you've only got a couple of options fundamentally to move toward financial dependency. You can spend less, you can earn more, you can invest aggressively, or you can create by starting a business, for example. And right now, I think for Mark, the problem that he's running into and the frustration that he's expressing is that none of those four options are really accessible to him at this point, right?

Starting point is 00:05:16 I mean, to spend less, we got to leave California. That may not be reasonable with five kids. Imagine uprooting five kids. maybe they're, you know, all the way, I think they're like from elementary to high school. You know, uproar your high school kid to go and achieve fire. I assume we're already optimized on the income front and don't have that large opportunity to put in the extra 20 hours, especially with five kids that are growing up. That's precious time to spend time with.

Starting point is 00:05:43 Risky investments, you know, similarly require a lot of time and intention or a very large risk profile, which may not be appropriate in that situation. and where are we going to find the time to start a business while working a full-time job? And I think that's fundamentally the problem that Mark is running into here. And I think that the challenge I have as a host of Bigger Pockets money along with you is, I don't have a solution for Mark at this point. He's probably doing the right things for his situation. And that just means that, you know, saving a little bit in the 401K,

Starting point is 00:06:15 automating the wealth building to a certain degree to make sure a traditional retirement set up and goes strong and making family memories while your kids are still in the house and still young is is the right approach. And I think that that's what I grapple with is I don't know if I have anything to add to that story. A bigger pockets money does. I think that there are so many people that do a great job with that kind of stuff like Dave Ramsey and Ramit Zati and Caleb Hammer, who's a relatively new person with a great show on there or the money guy. And do we, you and I, Mindy, have something fresh to take on a situation like that?

Starting point is 00:06:55 I think is the question we should answer. Yeah, and I don't think so. I mean, it goes back to those four things. What I know to work, and I know this because I've talked to hundreds of people, is that spending less than you earn, investing the rest of it wisely, having very low expenses, creating a business or some other way of growing your wealth are kind of the ways that's like that's the path to go. And when you veer off that path, you're not going to get to the same end location.

Starting point is 00:07:31 So it's still worth pursuing, I would believe, even in his situation. If his five kids aren't going to live at home with him forever, perhaps he could eventually move out of the high cost of living area. Maybe when the youngest child is in school full time, his wife can go back and get a part-time or a full-time job. And because they can live off of his salary, they can take all of her salary and throw it into retirement accounts to help boost their retirement or their emergency fund or wherever they need the money to go.

Starting point is 00:08:06 But this set of circumstances, I don't have any wild solutions. I mean, I think that really everybody would love if I just had an easy button that I could be like, oh, just do this and then you're there. But that's not how it works. You have to have different circumstances. We've had a lot of stories on Bigger Pockets Money about people starting in a position that seems very much like Marx or that starts with a median income and nothing in the way of assets. And achieving a really strong result in a fairly short period. at a time, but typically those involve a major lifestyle reset that results in dramatically slashed expenses or a major career move that results in bigger income or a invent and building an

Starting point is 00:08:57 investing system like out of state real estate or flicks and fix and flip properties or basically a business of some of some sort or truly moving into the entrepreneurial realm and starting a business. And those stories are awesome. We like if you want people, if you want to hear about people who've started in positions, maybe like Marx, on there, who was the guy, the gentleman from Michigan with five or six kids who did that? Oh, Jordan Clint. Jordan Clint. Do you remember what episode of that is? You're like an encyclopedia with you.

Starting point is 00:09:28 I believe it was episode 63. Look at that. That's pretty remarkable out of that. And so we have stories about this, but that's a low-cost living area, right? And there's an intentionality behind that and a hands-on relationship and building the whole life. around making sure that they're able to achieve fire. And I think that that's another component to bigger pockets money is, the more I kind of talk about fire,

Starting point is 00:09:50 the more I realize it's not and shouldn't be for everyone. We had a discussion about this just a few episodes ago. This is really for folks who badly want financial independence to the point where they're willing to give up something else that can be very important in life in order to attain it, whether that's a long-term wealth number by changing their portfolio to allow consumption from today, whether that's working crazy hours and spending way below those means for a very

Starting point is 00:10:20 long period of time or something else. And I think that that's what you've got to be willing to do to achieve fire. And if you want to do that, bigger pockets money, we're going to help you, we're going to help you figure that out. We're going to help you make choices. I think that will accelerate the realization of a portfolio that can actually generate a retirement level of wealth early in life for you. But we're not going to pretend like you can do this in an environment that is static and does not have a major gap between income and expenses. I think that's really the point there is you have to have a major gap between your income and your expenses. And there's this particular situation, he's got a confluence of events that are working against him, which is

Starting point is 00:11:08 unfortunate. Stay tuned for more on what the biggest levers standing in your way of achieving financial independence are after a quick break. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-e and one personal finance tool designed to make your life easier. It brings your entire financial

Starting point is 00:11:42 life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all in one tool that makes money management simple. Use the code pockets at monarch.com for half off your first year. That's 50% off at monarch.com code pockets. I love Matt, said no one ever. Nobody starts a business thinking,

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Starting point is 00:13:14 streamlined their finances with Found. Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Liener Stronger for Fitness, The Anxious Generation for Parenting Perspective and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more. All accessible in one app.

Starting point is 00:13:53 If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at Audible. Scott, how do you define financial independence? I define financial independence as building a portfolio of wealth position that is capable of producing enough liquidity or wealth that you feel comfortable leaving your job on an indefinite basis. There's a whole bunch of other fies out there, lean five, barista fie, whatever. But I don't think that's what most people listen to Bigger Pockets money wants.

Starting point is 00:14:39 Some people want barris to fire or whatever, but I think most people listening to Bigger Pockets Money are doing so because they want a traditional financial independence portfolio. And I think that in 2024, that means a wealth position of between $1.5 and $2.5 million and a reasonably well-diversified portfolio. And that is what we, I think, are trying to help people achieve early in life. Some people may want even chubby or fat fire, but I think if you're listening to Bigger Pockets money, you're typically going after that goal. But that could be a false assumption. I'd love to actually learn about that from folks. And maybe you can comment here if you're watching this on

Starting point is 00:15:12 YouTube or let us know in the Facebook group, if that is your goal. Yeah, we're going to start a thread in the Facebook group for this specific episode because I would like to hear what is your definition of financial independence? And do you think that you will achieve it? Do you think you will achieve financial independence at all at any age? And do you think you will achieve early retirement. And early retirement is a choice. Just because you get to that position doesn't mean you have to retire early. But I would be really curious to see how many of our listeners are actually on the path to financial independence and have an idea of when they'll reach it. And do they plan on retiring afterwards? I think more than that, the fact that that is the goal, and that's what I

Starting point is 00:15:59 back into with every single Bigger Pockets Money episode as the assumption, at, it's a at the minimum assumption for many of the guests. I think that a byproduct of that is just generally sound financial thought processes and decision making tools. To back into that portfolio, you have to plan ahead. You have to think, what is that portfolio going to look like? What is my investment portfolio going to look like? What are the tools available to help me withdraw from my 401k? What are the tax advantages of real estate? What is planning for health care in early retirement look like from this? As a byproduct of moving towards that goal is, just general flexibility in life that is not really in place for millions of middle class

Starting point is 00:16:42 trap, as we like to call them, Americans out there that have most of their wealth in their 401k and home equity positions. And so I don't think you have to necessarily need to get to the, you know, true fire to get value out of bigger pockets money, but that we deliver better value to you as the listener by always starting from that framework or that kind of that, that, that, finish line as the goal. And I think that, again, that's fundamentally different from it, for example, our friends over at the Money Guys, they do a great job, very much more traditional retirement planning and wealth building advice over there. Fantastic advice. We've had them on the show a couple times. We've been over there a few times. But what we're different from Money Guy is that

Starting point is 00:17:23 we are presuming you want early financial freedom and are going to build a portfolio and make the hard tradeoffs to actually make that happen. And it's a fundamentally different way of planning and thinking. hopefully the combination of our discussions, our advice, the things we talk about here on Bigger Puckets Money, and wherever else you're getting out there, help you and give you good debates to think about and tradeoffs. Maybe you'll take a bit of everything as you make the decisions for your portfolio. Well, and Scott, how many articles have you seen online that say, the average American will never be able to retire because they're not save enough money? even if early retirement isn't in the cards for you, traditional retirement can still be in the cards for you by following all of the advice that we're giving other people. And, you know, your circumstances are different from anybody else's that you're listening to, but it's all basically the same.

Starting point is 00:18:16 Spend less than you earn, invest wisely, work to reduce your expenses, have a diversified portfolio that is generating income or that you will be able to withdraw from, sell off and withdraw from in your retirement phase. But there's no reason why anybody listening can't hit traditional retirement and then you just back it up from there. Have any of our guests been normal? Can you remember any guests that didn't have a fantastic set of circumstances? Yeah, look, we've had plenty of people who have started in what we'll call normal circumstances, but I think we've had very few who have, like, this is a show about financial independence and early retirement and planning towards that and making moves towards that, spendable liquidity, building

Starting point is 00:19:10 wealth early in life that can be accessed to provide optionality. And, you know, we don't have stories of someone who has earned a median or lower income with a family and saved 5% over 50 years, 40 to 50 years, to achieve traditional retirement. Those are great stories. They're wonderful. That's much of America out there. And that's available, I think, in a lot of other platforms. I think, again, like, that's where I would go to, like, point out Dave Ramsey, for example.

Starting point is 00:19:41 That type of person maybe benefited heavily from that and will have a comfortable retirement and a really good career. And that's awesome. But that's not what we've been. been focused on at Bigger Pockets Money, and the person who has a reasonable shot at achieving early financial independence, which is essentially everyone that we've had on Bigger Pockets money for the most part, maybe with a small handful of exceptions that I'm sure Mindy will remember here, you know, those are not, at some point they diverge from normal. At some point, they earn a

Starting point is 00:20:15 higher income or they are a huge example, or extreme example of frugality. or they have an investment that goes really well. Or again, they start a business. We've also actually covered lottery winnings and inheritance, but we've never covered marrying rich. That's a joke. We don't recommend that as a strategy here. Yes, you heard it from Scott.

Starting point is 00:20:36 Mary Rich, that's how you can achieve financial independence. I can't think of one person that we have talked to who lives in a high cost of living area with a lot of kids and doesn't make a lot of money and has still reached financial independence. but there's lots of stories of people who have done it differently. Episode 130, we talked to Susan and Norm. They got to financial independence in 12 years, starting from a position of, if I recall correctly, they had some significant debt.

Starting point is 00:21:11 They also had a business, Norm as a painter. And they hit their financial independence number in 12 years. We've had some people with these different stories. There was a couple that had 14 kids and they still created, they still reached financial independence. But they had very low expenses, incredibly low expenses, considering the 14 kids, but also they lived in a low cost of living area. I mean, I wonder if that's the key, Scott, the low cost of living area. When you're not spending 40, 50, 60 percent of your take home pay on housing, and, you know, just living.

Starting point is 00:21:51 Yeah. I mean, look, after tax wealth accumulation is the name of the game, in my view, for early retirement, right? Unless you're going to specifically pursue a strategy of harvesting retirement account funds early, like the gentleman we talked about a couple episodes ago on episode 560 with Eric Cooper, right? And he had a big retirement account. So there's a way to, there's ways to do that.

Starting point is 00:22:17 but fundamentally fire, to retire early, you need money to spend after tax on your lifestyle. And in order to do that, it's just really hard in a high cost living area without a correspondingly high income. In fact, it's probably harder to do it with a high income in a high cost living area than a moderate income in a moderate or low cost area because the low cost of living allows you to accumulate way more after tax dollars. You're probably paying less taxes to the government on a per dollar of income, for example, in there. But we're going to find a lot more examples of that kind of achievement of a fire, I think in lower cost of living areas than on the coasts, for example. We get a lot of folks from California because it's such a big state,

Starting point is 00:23:04 but I think we're relatively overrepresented in the fire community in the Midwest and the mountain west, I think. We had actually a lot of Mountain West folks. there, something about the mountain air that makes you want to pursue fire in Colorado, Utah, all those kinds of places out there. Something about Michigan and Wisconsin too. But that's, there's something, there's something about that that I think makes this more of reality where there's, maybe it's a cultural thing where there's just less of a pressure to spend big. And like the cool factor in Colorado is how what your 5K time is or how many days of skiing you get rather than the car or the house of those kinds of things.

Starting point is 00:23:43 But there's something about it that's different. And there's like a little bit of a cultural impetus here. No, I think that's true. Like in when you're in New York City, it's very apparent that what you wear makes a big difference. When you're in L.A., what you wear makes a big difference. And having the nice car and there's material possessions that, help propel you. I mean, my dad once worked for a company, and they're like, you know what, your car is crappy. We're going to give you an allowance so you can buy a better car because you're

Starting point is 00:24:19 taking people around. He was like a vice president of, I don't know what. You're taking customers around and you're driving them around in this crappy old car. So we want you to get a better car. And first impressions sometimes matter. And on the coasts, maybe that's a little more prevalent. But yeah, in Colorado, people don't care. Like, it's way less. It just feels way. Or maybe I'm just too old and I don't care. We have to take one final break.

Starting point is 00:24:50 But when we come back, we're going to discuss the future of the bigger pockets money podcast. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money. is going, and more importantly, where your tax refund can make the biggest impact. Because the

Starting point is 00:25:12 goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code Pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves in Edle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes

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Starting point is 00:28:50 We all know AI is changing work forever. Now let's change it for the better. It's a new work day. Let's get back to it. Should normal people, traditional people, continue to be. you to listen to the podcast? Yeah, look, I think bigger pockets, bigger pockets money is first and foremost of financial independence and early retirement podcast. We are building content to make financial independence attainable for anyone no matter when or where you're starting if you're willing to make big changes on one or more of these levers. And I think that for Mark, you know, he's not willing to make any of those changes and he shouldn't be, right? You're not going to move a family of seven into a house hack.

Starting point is 00:29:32 You're not going to do a live-in flip in that situation at this point in time. Career change is not not on the cards, and there's not enough of a spread to really make large after-tax investments that can move toward financial independence. That's great. But what we are, in addition to being a financial independence and early retirement podcast, is I think we're college or maybe even a little bit beyond that level personal finance. So if you want really advanced tips and tricks and, you know, tidbits that can help you move your portfolio forward, like how to use substantially equal periodic payments to access your 401K early, creative real estate investing ideas, ways to set your kids up for success long term, ways to, you know, strategies to pursue that may not be applicable today, but will be in five, six, seven years for you. or just generally keep up to date and really fresh on the skill of personal finance,

Starting point is 00:30:31 I think we're going to be a world-class resource for folks. No, we're not going to have a lot of stories of people achieving financial independence at an early age without doing those big changes. But we're going to have a lot of stories about ordinary people or people who start from ordinary positions and make changes that drive them to financial independence. And some of them are going to resonate. Some of them are going to be actionable for you if you listen to this show and get enough of those stories. I think there are tips and tricks that you can take from every single episode, even if that episode doesn't have a core interest for you or you can't identify with the person who is sharing their money story.

Starting point is 00:31:08 There's still things that they would have done that you could say, oh, I can do that. There's little tips that I get from talking to people every single episode. And there have been some whoppers of tips where after the show I was like, I did not know that. I was today years old when I just learned this thing. I mean, Tony Robinson taught me about a margin loan against your stock portfolio. I had never heard of it. As soon as we got off the episode with him, I reached out to my husband. He had never heard of it.

Starting point is 00:31:38 And I used my margin loan to buy a house, which we talked about on another episode because that's not always the best choice to buy a house. Yeah, I mean, there's power tools too in here, right? Power tools can cut both ways. they can really make speed things up and they can really hurt you. You can really hurt yourself by using them like that margin loan. Yes. Yes, that is absolutely true.

Starting point is 00:32:01 It worked out in the end, but it could have been rather disastrous if we didn't have safety nets from other places, which are also things that I have learned from talking to people on this podcast from listening to the other podcast that the Bigger Pockets podcast network puts out. There's just great tips. Yeah. Like when you want to go and sell your home. in Southern California, Mark, for example, you're going to learn here on Bigger Pockets

Starting point is 00:32:26 Money how to use that primary capital gains exemption on there. Or maybe how to use the, not just the $250,000 per individual or $500,000 if you're married, but the ability to actually add additional people to title like potentially your kids and save even bigger on that. That's a real possibility from a planning tip. Whether to prioritize the HSA or the 401K, for example, is another thing that we can really talk about on this match versus match 401k, then HSA, and then 401k or Roth, around these, when to use the 529.

Starting point is 00:33:00 Those are great topics that we will cover here on Bigger Pockets Money. And again, all framing from the concept of achieving early financial independence, but that toolkit will help you make really good decisions, even if you're not on the financial independence, retire early journey. Yes, yes. And I was really just setting up Scott for that answer. I absolutely believe that if you are listening to this podcast, you should continue to listen to it because we do give great content.

Starting point is 00:33:27 I really think we do make great content. We talk to interesting people and we tell interesting money stories. And that is my favorite. Like everything else in life, it's a two-way door. For now, we're saying that we're going to continue to stick to our roots as a financial independence and early retirement podcast. And we're going to select for and bring on guests that are on the journey or have achieved that goal.

Starting point is 00:33:50 And think about the ways to accelerate. that or make that more accessible for more and more people. However, that's a two-way door, and we may change that depending on your feedback. So please let us know in the comments, let us know in the discussion if you want us to change the focus and broaden to a different degree. And maybe we'll come back and reconsider or rethink through it. And in our Facebook group, I am going to post a, I'm going to start a thread. I would love to hear from you about your financial journey, when you think you're going to reach financial independence, and if you think you're going to retire early.

Starting point is 00:34:24 So go to Facebook.com slash groups slash BP money and join in our chat. All right, Scott, should we get out of here? Let's do it. All right. That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. You can email him, Scott at BiggerPockets.com, and give him all of your commentary and thoughts. I am Mindy Jensen.

Starting point is 00:34:47 You can email me, Mindy at BiggerPockets.com. And, of course, we're both in the Facebook group. And we are saying take a bow, Highland Cow.

BiggerPockets Money Podcast - 563: Why Aren’t More “Normal” People Achieving FIRE?

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