BiggerPockets Money Podcast - 77: Entrepreneuring Your Way To Financial Freedom with Pete Mockaitis

Episode Date: June 17, 2019

Pete Mockaitis grew up in the cheapest place to live, Danville, IL. He watched his mother work her way up the local credit union ladder from teller to CEO, simply by doing more than necessary, repeatedly. His mother strongly discouraged debt, having seen so many of the credit union’s customers declare bankruptcy and have their entire bank accounts wiped out. As a kid, he saw firsthand that hustle pays off. He helped his brother with his paper route for a quarter, only to learn his brother was making $1.80. After high school, he got into college on a full ride scholarship, and graduated into his dream job with Bain & Company. He saved money by skipping the little things like taking a cab when he could walk, having roommates instead of living alone, and drinking water instead of ordering drinks when he was out. Pete’s true calling was entrepreneurship. To prepare for the jump to self employment, he figured out his burn rate - and discovered it was a lot lower than he originally thought. By figuring out how much he was spending, and computing the value of his pre and post tax time, Pete optimized his path to Financial Freedom, and is now enjoying the fruits of his labor. In This Episode We Cover: Pete's journey with money Lessons he learned from his mother How he applied the lessons he learned in his approach to early financial freedom How he pursued early financial freedom On growing up frugal Why it took him 3 years to save a year’s worth of living expenses His advice for people who would like to try the entrepreneurial route The importance of being smart with your savings On being real and quantitative On tracking recurring and non recurring expenses and breaking it down into dollars per day On his revenue generation His advice on building revenue On investing And SO much more! Links from the Show BiggerPockets Forums How to Become an “Overnight” Success in 10 Short Years with David Greene How To Be Awesome At Your Job Episode 386: How to Earn More, Spend Less, and Build Wealth with Mindy Jensen BiggerPockets Money Podcast 73: Ramit Sethi Will Teach You to Be Rich! BiggerPockets Money Podcast 56: Change Your Personal Finances (& Your Millennial Money Mindset) with Paychecks & Balances Podcast Movement Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 77 with Pete McItis from the How to Be Awesome at Your Job podcast. And then that always just kind of brought me comfort like, all right, hey Pete, even if you had zero revenue, zero for over 400 days, you wouldn't be dead broke. And if you were dead broke, you're not dead. You know, about 14% of people actually have negative net worths. It's okay. No need to panic. It's time for a new American dream, one that doesn't involve working in a key. cubicle for 40 years, barely scraping by. Whether you're looking to get your financial house in order,

invest the money you already have, or discover new paths for wealth creation, you're in the right place. This show is for anyone who has money or wants more. This is the Bigger Pockets Money Podcast. How's it going, everybody? I'm Scott Trench. I'm here with my co-host, Miss Mindy Jensen. How are you doing today, Mindy? Scott, I'm having a great day. How are you doing today? I am doing great. You know, I want to jump right into the discussion about how folks can kind of get some takeaways from this podcast. And there's three, you know, we're going to talk about this in depth with Pete, who is a fantastic guest, very smart, lots of kind of new thoughts and insights in terms of how to make this whole personal finance thing work. But three kind of actionable tips that I think you should kind of think about seriously doing right now or right after you listen to this podcast, right when you get home or finish, whatever you have the opportunity. One, compute your daily, weekly, or monthly, or some sort of time-based burn rate, the amount of cash that it costs you to fund your lifestyle as it currently exists.

And compare that to the amount of savings or liquidity that you've got that you'd be willing to spend to fund that lifestyle, right? That's your financial runway. That's the amount of time you can survive without a paycheck and still kind of maintain your lifestyle, right? Number two, compute the value of your time, both pre-tax and post-tax. So how much do you earn per hour before tax? How much is that equal after taxes are distributed from that? And are you doing activities in your life that you could maybe hire out that would be much more cost-effective for you? And then the third tip is, once you have those two numbers, can you kind of see some inefficiencies in your life, some ways that you could dramatically increase your financial

runway or leverage your time or your money more effectively to help you move towards what really matters in your life. We're going to get into those concepts in the interview today, but I wanted to kind of hit those home right off the bat so that you had them in mind and we're thinking about them going into the show. Yeah, that's a really great point. That is a huge part of today's episode. And, you know, I actually struggle with the concept of hiring it out. So Pete really has a great way to look at that in a slightly different angle and discover that, you know, you're not a bad person for paying somebody to do something for you. If you can then use that time to go generate more income than you are paying out in the cost of that service. So that's, as a DIY person,

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Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP Money. Pete McItis from Awesome at Your Job. Welcome to the Bigger Pockets Money podcast. How you doing today? Oh, I'm great. Thanks, Mindy. Thanks, Scott. It's a thrilled to be here. I'm super excited to have you. We send out a pre-show questionnaire to all of our guests. And I really liked some of the answers that you said, especially your one about how did you find financial independence. And some of the things that we're going to be covering today are like how you grew up knowing about money, which is a little different from most of our guests. So let's start off with where your journey with money begins, and then I want to know exactly how you discovered financial independence. Oh, sure thing. Well, my journey with money begins in my hometown of Danville, Illinois, which fun fact was once named, the cheapest place to live in the United States. So that's cool. And I remember maybe my first money experiences were with my brother who had a paper route. And sometimes I would help him out. And he'd pay me a quarter for my assistance. I thought that was pretty cool, because I could get two little jolly rancher sticks from the nearby market for a quarter. until I learned that he was banking about $1.80 per route,

which is still a crazy low number, right? How is that legal? And then he sort of made the point, well, hey, I'm sort of bigger and stronger, faster. I do more than half the work, and I have to do it every day, and you sort of help out whenever. So, you know, I think it's fine. And so he had the bargaining power, and I learned a lesson when it comes to money and positioning.

Yeah, I didn't do the route as often after that, but I still did from time to time. that's probably where it begins, but I think really where it matures is that my mom worked at the credit union in town for teachers, which was kind of funny. So like all of my teachers were in contact with my mother regularly where they were like depositing their paychecks, which, you know, is good and bad, depending on my behavior in the recent weeks. And so there were just a lot of great lessons there in terms of she was kind of spooked about debt because she had seen people, you know, declare bankruptcy and then just sort of, that just wipes away the money

and the credit union from the members. And that was kind of spooky for her. So I was like, note to self, don't go bankrupt. That's very bad. That kind of triggered something deep in me. And I've been kind of cautious about debt ever since. But maybe the positives kind of moved toward lesson she taught me there was she noticed that the CEO would stay late to vacuum the place. And she thought, well, that's kind of odd. You know, I, I, know how to vacuum. I don't know why that sort of most senior person should be doing the vacuuming. And so she volunteered to do the vacuuming. And from that little proactive step, she got more and more responsibility, you know, took on some more and more like classes at community college and

conferences and training until ultimately she became the CEO. She rose to prominence of that organization, all because she started to volunteer to vacuum. Just a little bit of proactive of noticing and making your boss's life easier was a pretty cool lesson. I love that. You know, I think that that mentality is not common enough with folks in the workplace, right? Like, isn't vacuuming beneath her? Right?

Like, that should be. You can think of that. It's important to be vacuum, right? I didn't get a fancy degree to vacuum. Yeah. No, I think it's a great piece of advice just generally. Like, if you're looking to get ahead, I mean, you go back and listen to David Green. Oh, yeah.

On the Bigger Pockets Money podcast. I forget what episode that is. We'll mention in a second here. Episode 12. Oh, wow. Mindy's on the spot with it. Okay. But his episode, he brings that mindset to it

and the career ramifications of bringing that to the table, those little extra efforts, and the ability for them to generate more opportunity and fast and rapid advancement, just absolutely astonishing. Absolutely. Well, and she's not cleaning toilets with her own toothbrush. Oh, right.

She's vacuuming the floor. How gross is the floor? Right, especially if it's vacuum daily, you know, you can't keep late too much. Exactly. And how big is this space? She's not vacuuming 25,000 square feet of floor. She's vacuuming, you know, a fairly small portion. Yeah, it sucks.

But look at what her boss. Oh, I. Oh, God. Her name table. God. Oh, I quit. I'm done. And from episode 77 of the big amount.

bag. No, but, you know, vacuuming the floor isn't like somebody's life dream, probably. But it doesn't take that much time. It's not that difficult. It's not that gross. So your boss notices. And some people will say that it's a suck up maneuver. Oh, God.

God. I'm trying to. That's fantastic. I'm out. Goodbye. No, it's not fantastic. It's horrible. We're cleaning house with a vacuum jokes.

Oh, God. Oh, this is going to be the worst. episode ever. It's going to be good, too. Pete's really smart. No, I was trying to say, you know, kiss up. There you go. Kiss up to your boss.

You're not really kissing up to your boss. You're doing something that needs to be done. And I think a lot of people might stop themselves from volunteering this. Oh, I don't want to look like a kiss up. Not going to say the mackey words anymore. And it's not that. You know, David Green asked his boss, what is your pain point? What do you hate?

And she said, I hate that there's spots on my glasses. Well, I've been a waitress. You know what? You have a lot of downtime, especially when you first get there. So you can stand around or you can wipe glasses and stand around. If you're wiping glasses and your boss is happy about that, I just don't see why some people call it sucking up. You're helping your boss.

You know what? You want your boss to like you. Let me tell you how much it stinks to have your boss not like you. I didn't say suck. Certainly. Yeah, and I think maybe if they think it's sort of kissing up, I think that's maybe just a rationalization for, you know, I'm not doing that and maybe I should be and I kind of feel a little, I don't know, maybe bad or lazy that I'm not hustling. So the simple way to relieve that

cognitive dissonance is to be like, yeah, that person's kissing up. I don't want to be like them. So, you know, but that's not a great, not a great logical, you know, place to be coming from. So how did these lessons you learned growing up translate into, your approach to early financial freedom. Oh, sure thing. Well, some of them were semi against my will, I guess. So, for instance, with the debt story, I fell in love with Duke University. I thought, oh, my gosh, this is just the place. This is the campus. This is the vibe. It's so cool. But all of my family went to the University of Illinois, which is about 40 minutes

away from where I grew up, which is a great school, you know, US News, Top 50, all that. But I was just like, yeah, I don't know. I've been there a few times. It's really speaking to me. I don't know. And so that was like the one time my mom and I kind of tussled a bit. We sort of were, had, you know, great, got along very well. But there, there was a little bit of son, mother, turbulence. And in fact, I even got a full tuition scholarship to the University of Illinois. And I originally hit it from my mom because I thought, well, that's going to be difficult to have the conversation. Like, I know I have a free tuition, but I don't want to, I want to go somewhere else. But ultimately I came around and said, you know what? I met some cool people there. There's some cool

activities there. And I grew to love it. So I was very pleased I went there. Mom was correct. University of Illinois is a great choice. And it was awesome to exit without any debt associated with college. And we talk about the initiative. I also kind of discovered this industry called strategy consulting, which I thought seemed like the coolest thing ever. And I was hungry to sort of from day one of college, they could be in proactive. I thought, all right, I want to end up at McKinsey,

Bain, or the Boston Consulting Group, and I'm done with this. And so I sort of planned my extracurriculars and my practice of what's called the case interview to accomplish that. And then it was really cool how when I got my internship at Bain, I saw a letter with the other interns. And so we also had some folks from Northwestern and Duke.

It was like, oh, I didn't go to Duke and I'm in the same career place without having. to pay a bunch of debt. This is awesome. I love it. And by the way, just for everyone listening, this speaks to an incredible track record of success academically throughout high school. And then to get an employment offer with Bain out of college is outstanding, right? That's the, it means you were a top student in the class, interviewed well, all that kind of stuff. Well, thank you. Yeah, it is. It's pretty competitive in terms of the applicants versus the offers.

So using that great opportunity out of college, how did you then pursue, financial freedom. Oh, sure thing. Well, you know, it's funny. So I, I grew up frugal, you know, in terms of, you know, my parents would say if we went out, you know, which is somewhat rare and usually to like a fast food place, you know, it's like, we're not going to buy a beverage. We have beverages at home. It was like, okay. And that was just sort of like the norm. And so I would be, I would order water, you know, just sort of like instinctively in most places. I much preferred the house parties when available amongst my, my bay and colleagues, as opposed to go into the fancy club with the fancy cocktails. And this is before Uber X was really

kind of up and running. But if I had to choose between a cab fare, which is pretty pricey, or a bus or just a longer walk, I would almost always choose to walk. And sometimes my colleagues there would tease me a little bit, like, you know, we make a lot of money, right? It's not really necessary for you to ride the bus. And I also had two roommates and then three roommates in the apartment which I lived at, which was, which was awesome. So sure enough, I was able to do a whole boatload of savings because I had a hunch that the next step for me was going to be something entrepreneurial. I had a Jones to do some, you know, speaking, writing, people development stuff. And I had a great mentor who said, well, Pete, save some of that Bain money because that's probably going to take a

year plus before you're really up and running with that. And I said, okay, thank you, sir. And so I did just that. So how long did it take it to save up a year of expenses? Yeah, you know, it was just under three years is the length of time. And so it was funny because I remember thinking that, boy, they're paying me plenty here. And in fact, I might have been the only person who thought this at the time, but I said, you know what, I'd be cool if they just like paid me half and made me work half as much, you know, because I got all this extra money. And so people sort of thought that was odd, but that's because they were living in their snazzy, I guess, fancy or maybe one bedrooms, you know, right near the river and the beauty. And I was a little bit more north by Riggley Fieldish. Love it. So walking through that, I mean, you save up for these three years, you get a year's worth of expenses lined up.

I assume in an area that you can access them, and then you do what? Well, then I took the leap, you know, and I probably should have had a better plan or had a little bit of a side hustle going first. But in a way with the consulting firms, it's sort of regimented in terms of like the timelines. It's sort of like, okay, hey, it's been about three years. What do you think? And think in business school, you know, where do you want to be? And I say, you know what? I think I want to take a crack at this speaker, author, people development thing. So that's what I went and did. And it was funny. I kind of, floundered for a little bit because I think I maybe drank too much Kool-Aid when it comes to the

follow your dreams, follow your passion. I was like, yeah, I'm going to do that. You know, it was like, well, wait a second. You know, all the rules of business still apply. Like, there are customers who need to purchase an offering from you that solves a problem or is superior in some way to the competitors. And so just because it's your passion to, you know, be on stage and speak or right, doesn't actually mean it's going to get you paid. Some passions get you paid and some passions don't. And so that was very informative for me as I kind of floundered a little bit like, I'll talk to anybody about anything. You know, I can do my research and make some slides that look great. And then I kind of really zeroed in over time. It's like, you know what, really,

it's sort of about the universal skills and the speaking and the thinking that's working out. And so what sort of saved my bacon as my money was, you know, declining a little bit is I sort of plugged in with another guy who was offering a case interview coaching for aspiring management consultants. I was like, oh, this works for me. It's people development. And it's something I know. And I could sort of fit it in in between speaking gigs. And it was awesome. So that's kind of how that worked out. I had, I often freaked out like, oh, my gosh, am I going to run out of money? I don't have a paycheck the way I used to. But what I did was make a spreadsheet that kind of laid out, okay, here are all my assets. Here's how quickly I'm spending money on dollars per day basis. And then

that always just kind of brought me comfort like, all right, hey, Pete, even if you had zero revenue, zero for over 400 days, you wouldn't be dead broke. And if you were dead broke, you're not dead. You know, about 14% of people actually have negative net worths. It's okay. No need to panic. So I think that that's a great outlook, right? And I think the fact that you saved a lot of money and likely had a fairly low cost of living kind of enabled some of that comfort for you to keep it when you put together that spreadsheet and did all that all that work. What did that timeline look like in terms of getting your business to a point where you thought, hey, great, now this can be sustainable and grow long term. And I'm not looking for the amount of

runway I've got left before I run out of money, but now I'm looking for, hey, this is going to work and how do I grow it? Sure thing. Well, you know, it took a while. And I think that it could have gone faster if I were smarter in terms of, you know, like your wise guests would suggest. Jess, you do a little bit of a side hustle and you learn and you get some traction, you find product market, but you know, some of those sort of smart things, it could have been much less painful for me, but no, I'd say my first year, I had around $8,000 of revenue. My second year was around $35,000. And then my third year, it's like we were kind of making the net worth go up again, as opposed

to down. And so that was, I think, maybe like 65 plus. And so then, and it's been in a growing, healthy place from there. And I could have not dropped so low, been a little bit more proactive and clear on what am I offering and what's distinctive and getting a little bit of traction before I left the comforts of my paychecks. Love it. And it sounds like those are skills that one could have developed at Bain.

You know, it totally could. It's like, it was like, wait a minute. All these rules apply. I just got to get up my spreadsheet and do what I do. And that helped. Love it. I just think it's a funny kind of levelation. It's like that's what, yeah, that skill set perfectly applied and then helped you kind of boost this thing to the next level, it sounds like. You know, it really did. And that's kind of what I chose that profession

originally because it's like, I don't know for sure what I want to do, but I did walk away pretty convinced that. And if I start in strategy consulting, I'll have some skills and some bankroll and some network that can help me with whatever I want to do next, from starting a nonprofit to you know, working private equity or any number of options. It seemed like a nice flexible move. Awesome. So what year did you leave the job and what year did you get to that kind of $65,000 market revenue where it was sustainable? Sure thing. It was about 2009 when I departed and it was 2012 when things were feeling all right. You quit a job in 2009. Didn't you know there was a big recession going on? Yeah, but I was following my passion, Mindy.

Okay, so knowing what you know now, would you have gone back and done that again in 2009? Or would you maybe have altered your timeline a little bit? I would be okay with the timeline. I would just be a much smarter about getting clear about, okay, what's the product, what's the offering, who's the customer, how am I distinctive? Like just those fundamental things as opposed to, I'm going to go speak. be fine. I think that's pretty naive of me. Okay, I want you to go over those again. Who's the customer? I want to write that down because that is, I think that's really important when you're going to be starting a company and especially if you're leaving your company, you need to have a really clear

goal of what you're, a really clear idea of what you're going to do. And I'm not here to tell you that you did everything wrong because clearly you did not, even though you did quit your job at literally the worst time. I have a daughter who was born in 2009. And, and I'm not here to tell you that. And, And her classroom size is actually shrunk. And they attribute that to the recession had been going on for like a year and a half or so at that time. And people weren't having babies. So I think that's really interesting that that's when you just up and quit on your job. Yeah.

How the timing worked. It's like, hey, graduate 2006. It's about a three-ish year role unless you are going for the next level. And so there we are landing right there. Okay. So how are we, who your customer is and how to find them and like all that defining stuff? Let's start from there. Oh, sure thing. Well, I think fundamentally when you start a business, fundamentally someone is going to part with money for what you have. You know, you have a product or service that they want more than they want their money. And they're going to sort of choose you if in fact you are delivering, you know, something that's worthwhile. It's solving a pain point or a problem. And it's a fine option. relative to the competition.

And so what I find interesting in the realm of speaking, you know, even though it might seem a little bit fuzzy, it's like, you know, your product is like a speech or a performance. And I thought, hey, I've seen a lot of people speak. And I think I speak pretty well. I've got some amazing evaluation saying I was like the best of a conference or whatever. So that's all I'll need, right? It was like, well, no, no, not quite.

You know, it's sort of like we need to see that in that realm, in that case that you have expertise to offer in terms of, oh, folks are going to walk away transformed, some new knowledge to be better able to do their job. or you are exceptionally entertaining. It's more like a comedy show, really, than like an educational experience. Or you're just famous.

All right. So if you're looking back at yourself or if you're getting advice to somebody who's trying to kind of go through this entrepreneurial route and maybe has some money saved and is thinking about exploring that, what would kind of be some high-level advice that you would give outside of knowing your customer

and knowing how to deliver a competitive product? Oh, sure, think. Well, I think that the savings is, is key. And one thing is I would just recommend that you be smart about your savings, that they are in an accessible place, as you mentioned. Like if they're tied up in your 401k, then, you know, they're going to have penalties associated with accessing them. So you want to make sure that it's good and accessible and it's not in a sort of a highly volatile place so that it doesn't dip right when you need it. So those are some fundamentals there. And then I would

get real and quantitative associated with, all right, what are all your expenses in terms of like recurring like your cell phone. Maybe you're going to have to buy your own health insurance, which is way of price here nowadays. Or you're going to have to get that car, rent, et cetera, all of those things. And I found it very useful to break those down into a dollars per day basis. Because some things I might buy weekly like groceries. And some things I might buy, you know, monthly like, you know, cell phone bill. And I got really clear on, okay, this is what it adds up to. And then here's how much fun money I have left so that I'm not sort of going nuts. And that was just so handy in terms of there's clear math that I just cannot argue with.

As long as I don't just go nuts, like, you know what? Vacationing all across Europe is what is happening now for three months. As long as I kind of keep things sort of normal, then those numbers will hold. And I had several check-ins from time to time. And that was just very reassuring in terms of like, I'm not going to go completely broke. If I do, I'm not going to be dead because I think that we have it hardwired, especially if you're listening to the Bigger Pockets Money podcast. Like you love watching your net worth go up and not down.

And when it's going down, that's freaky. It's like this is not how it should be. I am very uncomfortable with this. And there's almost like a biochemical cortisol reaction inside of you. Like, I cannot endure this. I might be dramatizing a bit, but sometimes that's how it felt. You know, but when I had that all in black and white and then if you check in, it's like, say, hey, Pete, 20 days ago, you know, you had three,

380 days of cash remaining. And now, hey, it's 20 days later. And you got 370 days of cash remaining. So it's even more conservative than it says it is because you have some revenue coming in. So take a breath and we're going to kind of pull out of this thing. I kind of imagine like a jet. It's going down. But not for long.

You know, we're correcting and we're back up. And it's all good. I love it. It's not, you know, I feel like people are very afraid to take the plunge to go in and do something entrepreneurial or on their own, even when they've probably got a position that's way stronger than they need because of that concept. If you're in control of your spending, you have a long period of time to figure out how to make something work if you're smart about it, I think. So I think that's right advice. Oh, thank you. And I think that, and you can be the,

you can go the other side of that too, you know, in terms of this is just what I want to do. And I'm sick of my job. I'm doing my own thing. And boom. Well, if you don't have that savings and a clear picture of how it's going to go, you know, that could be, troublesome. So I guess in a lot of this, there's sort of that sort of wise middle way to not be rash and to not be scaredy cat and just to sort of beologically wisely bold. Well, it seems that there's two components to this. One is the savings that you have and your burn rate, right? So how much time you have before you're running money. And the second is your revenue generation. So what would be your advice for someone who's starting out in this

terms of how they should deploy their time such that they can in building revenue? Oh, Scott, this is one of my favorite things to talk about, actually. I am all about thinking about the value of your hour in terms of real dollars. And so you can do this with your existing job, with a quick calculation on Excel, like, okay, what's my salary? What was the cash value of my benefits? What are my taxes? And how many hours do I have to spend at this job in a year? Divide and boom. And I'll tell you something meaningful. Maybe it's 20 bucks an hour. Maybe it's 60 bucks an hour. and then so many decisions get easier in terms of, should I buy some help here on this property?

Should I invest in some assistance on my website or should I do it myself? I had Michael Hyatt as a podcast guest recently, and he's so awesome. And he made a point with someone who said, you know, I kind of know how to make websites. So, you know, I figure that I'm going to be able to pull it off and just do it myself.

And he says, okay, so now how much do you normally make, you know, with your coaching? It's like, oh, $100 an hour. It's like, okay, and how much would it hire to cost to pay someone who's really awesome at websites? It's like, oh, maybe $50 an hour. It's like, so you're going to pay some guy who's not that good at websites, a hundred bucks an hour to do your website, reading yourself. And so he's like, oh.

And so that has really been eye opening for me. Like, I've had times where I was doing coaching sessions. And I was running over $100 an hour for these coaching sessions. And I might have 11 in a day, you know, during some busy months. And I was like, I don't know when I could do my, laundry. And so it's like, am I going to do fewer coaching sessions in order to do my laundry? And I actually hired someone to come into my home and do my laundry, even though I'm working from home. And on one side, that sounds nuts. This guy is working from home. He's hiring

someone to do his laundry. That's weird. But on the other hand, it's like, that would free up, I could pay less than one hour's worth of work to have four hours of laundry done. It was a three hour three-week buildup. It did a bunch of machines in basement there. And then I can, I could do more and have my laundry done immaculately. And it's like win-win. So that's how I think about it is look at your potential initiatives of your business and see, hey, you know, what are the odds that this thing's going to be successful, maybe put a percentage probability? How much money would that, you know, generate or save? And how much time will that take me? And what I find so striking about this exercise. I have a quick little spreadsheet for this, is that sometimes on the

surface you got two pathways that seem, you know, oh, how could do A or B? And they're probably, you know, similar-ish. But then you spend like five minutes putting them through some numbers. You're like, holy crap. B is worth 10 times as much an expected wealth generated for our invested. Let's do B first. You know, this is something that I really struggle with. And I'm glad you put numbers to it and gave a quick way to figure it out. I hate cleaning my house. It is totally not the FI way to hire somebody to do anything for you. You have, I'm a healthy woman. I have two strong arms and two strong legs and I can do it myself. But I hate it. There's other things that I love that I wouldn't want to hire out. But doing this exercise to see how much it costs me versus how much

I could be making if I was using that time to do something else has me thinking that perhaps I should go look and price out house cleaning services. Well, absolutely. And I think about the hourly rate so much in terms of like, would you spend, if you were to move an hour away from house cleaning, could you spend that in wealth creation activities? And would that, you know, create a substantial amount of wealth? And because of something like house cleaning, you may be able to find at $14 an hour with a little bit of savvy shopping around, whereas I find a harder time, you know, finding a good handyman for, you know, that may be $50, $60, $70, $80 an hour.

And so I more often will choose like, okay, I'm going to learn how to use this power tool and get it done myself as opposed to cleaning thing, which you may find, you can outsource it for a fifth of the price. Yeah. And that's, you know, I think a lot of people in the FI community in this FI, or on the FI path, have a hard time paying for something that they can do themselves. And I've heard it many times explained, oh, you should just calculate the amount of time

it takes you versus how much money you could be making. Well, would I be making more money? Maybe not. But this morning, I drove into work and my husband joined me because he's taking the little girl to the zoo. And he's like, oh, what if we did this? I'm like, oh, my goodness. I don't have time to do that.

but I have to clean my house every flipping week. And really every day because my children are pigs. But I have to clean my house. So if I took that away, I would have, let's be honest, I'm spending way more than an hour cleaning my house. I now have that time to generate, you know, start up a business that could go much further, you know, but I don't have the time to even think about it right now.

Or you might think about that time. That's the way I think about it in terms of the assets. I am buying an hour and I am selling an hour. It's like I'm just a trader. It's like I'm open for business. You know, I will buy an hour at hopefully a low price of maybe 20 bucks or less. I particularly like buying hours in the Philippines. That's a whole other conversation. And I will sell an hour at maybe $120, $200 an hour. And so if I have more opportunities to buy hours that I can then sell, then I think it's just like a brilliant arbitrage move that financial savings enthusiasts, I mean, if they had the opportunity to buy a stock at $20 an hour, or $20 a share, I guess,

and then resell that stock, you know, same day or next day for $120 a share, they would say you're a moron to not buy that. And so I think that's how I like to think about money is and time. They say time is money. And it really is true more so for me, you know, because I can, to open my calendar up for, hey, more or fewer coaching sessions. But I think it's true for all of us in so far as there are all kinds of things we can be doing that might save money.

For example, if you just don't have the time or energy to shop around for lower insurance, you're like, oh my gosh, that sounds like such a headache, although that'd probably be a win. And it's like, you could say, okay, okay, for today, I'm going to hire someone to clean my house for three hours. And I'm going to spend that three hours trying to find lower insurance rates. And so you may discover that your insurance savings dwarfs the cost of your home cleaning. You got to clean home. You're coming out ahead on the money side of things. And you just feel awesome because you're basking in your clean home with extra money and feeling smart about your insurance move. Yeah, I love this concept. And I definitely apply this in my own life. I think,

you know, on a side tangent, this is a very powerful part of real estate investing in particular because, you know, a real estate investor can do the work themselves if they earn a very little dollar amount per hour, as they get their portfolio off the ground, and then hire it out as their portfolio grows and their time becomes more valuable over an investing timescape timeline. In that context or in the concept of investing, how do you think about it when you have, hey, here's much dollars per hour I earn with my time, but then I'm also layering in the income generated by assets in terms of my, the value of my time, as well as I become wealthier.

So do you have a way to factor that in? You know, I've played this a lot of ways. And the way, I think at the end of the day, your numbers are telling you something. And sometimes I think, like, we could make an assumption, hey, that all of the time I have left on this earth is equal in value to all of the wealth

that I expect to have generated from this asset base. And so that's kind of trippy to ponder. And you may very well disagree with that sort of fundamental assertion. But that gives you one estimate of a dollar per hour ratio. What I like more so is what am I actually earning right now from my labors? And then the money that you're earning sort of passively is just kind of there to be enjoyed to be invested. Because unless you have the ability to amp up and increase that amount of passive income by doing some active stuff up front and seeding those assets.

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Because my taxable income is getting shaved by 30% or whatever. So do you take a discount based on your expected tax liability from your earnings in what, when you're speculation? Well, you know, I think you just want to try to be apples to apples as you. think about this, you know, in terms of, am I spending after tax dollars to enjoy after tax hours, you know, in terms of like leisure, if you will? Or am I spending pre-tax dollars on pre-tax hours? So, for example, that if I did some coaching work, you know, hey, that's revenue, but then that will be taxed. But likewise, if I paid someone to do my website updates, then that is also,

you know, a business expense, which is pre-tax there. So that's just how I think about it. Just make sure that we're on the same basis, to be fair. Oh, very simple and beautiful explanation. Oh, thank you. So, Pete, one of the things I think that's kind of awesome about the way you're approaching this is you're so analytical, you're so numbers driven, you took a shot, you saved up, you spend as little, you spend very little, you optimize the value of your time, you optimize your runway, you think like a business person. Isn't that like a strange quality? Like, how should, How should I feel about that if I'm not as analytical or not as, you know, all-out optimization mindset-driven as you?

Well, it's definitely strange. And so I'll give you that. You know, one time I was buying a pillow and I didn't have much money. I was in college. I had like $300 to my name. It's like, is this really a worthwhile investment? If I think about how I currently have a poor pillow and the value of my enhanced sleep quality, and yet the cost of this pillow, and so I was like, oh, my gosh.

Pete, you're stressing me out. I was sorry about that. So it's true that I'm kind of wired to think that way and consulting kind of just, you know, crank that up a little bit. But I guess that's what I think is, oh, so at the end of the day, you know, you make your own money choices that really work for you. And I think Mindy, when she was on my podcast, thank you, Mindy, I think she said that so well with regard to is like, I don't care what people think about this.

And I think that's really the best way to play it is that, you know, everyone's going to have a money. opinion for themselves and for you. They might think that you're crazy for doing living flips. Like, oh my gosh, how could you live in those dumps? You know, oh, how could you expose your children into that? It's like, okay now, we're getting a little judgy, like, excuse me. So they're going to do that. And others would be like, oh my gosh, that is so brilliant. And didn't even know you could do that. You're going to be, you know, creating so much wealth by doing so. And likewise, you know, that's for every decision. So we've been, we have not had a car in Chicago for 13 years.

that I've lived here. I got married and got now two kids under two. A car is probably on the way shortly. They live right near the train. And so I was a little bit embarrassed actually like, yeah, we still don't have that car. We're trying to find the one that works great with all these criteria. And we haven't really been out and about shopping for it, kind of busy with these kiddos. And then someone said to me, well, what do you need a car for you? You're right by the train station. And I was like, wow, I thought I was weird for not having a car. You think it's weird to get a car. And it's just like, you know what? You can't please everybody.

It's not even worth trying. So I just sort of think about, you know, what do you value? And how do you think about it? What are your goals? And do your thing. And some people will love it. Some people will hate it. But most people are just more consumed with their own lives and money, too, to care, in my

experience. Love it. Yeah. I mean, it's about what you want. And I think it's, I think the rear quality is not so much the analytical, hey, I'm going to optimize my time. I'm going to have a very clear understanding of my daily, run rate for cash expenditure, those sorts of things. I think the more rare thing is like, I have a

clear understanding of exactly what I want. And like that is the piece that's missing, I think, from a lot of folks. And once you have that, financial freedom is a very powerful tool to help you get there. And optimizing all fronts can be kind of a no-brainer, obvious choice in moving towards that and not weird at all. Or if people call it weird, too bad. You're working towards what you want. Absolutely. And I think that's a great point with regard to being clear on what you wanted and because I am in fact making less money now than I would be making if I stuck to the consulting route like, all right, hey, let's be a manager partner by now. Hey, baby. And so in a way, you know, I think about that as like, oh my gosh, I could have so much money if I had done that.

But at the flip side, it's like, you know, but I would also be working a lot more. And I'd be doing activities that I'm less into than what I'm doing. I would have less kind of control and flexibility over my schedule. And I would have met all these really cool people that I'm doing doing my thing. And a lot of my expenses are now tax deductible, which is really cool. So I genuinely feel wealthier now and then I would in a world in which I didn't have, you know, much time to spend on the things that are really important to me. Even though if we compare bank accounts to, you know, my main colleagues who's remained, there's are larger at the moment. No, they're not. They have more coming in, but they also have way

more going out. So the bottom line number is probably going to be significantly lower than yours, especially if they're renting instead of owning. Don't you have a house hack? I sure do. Yeah. And how much of your mortgage payment are you paying every month? Oh, well, you know, it's awesome. We are paying about negative $130 for our domicile. Okay, so zero percent of your mortgage payment comes out of your pocket. I bet 100% of their rent comes out of their. their pocket. I bet 100% of their mortgage payment comes out of their pocket and their car payment and their vacations and their fancy cell phone and their cars and yada, yada, yada. And I don't wish to cast this versions upon you, but you're wearing a T-shirt to work. Could you wear a T-shirt

to work at Bain? And that's the best T-shirt ever, by the way. I have one and it's super awesome. But could you wear that to Bain? Only on the rarest of days. Yeah, Sundays. If you all. Zing. We can. And work. Yeah. No. Do you work on the weekends right now?

Most weekends, I don't. But from time to time, when I have a really cool opportunity and there's some urgency or or I was having too much fun with the kids during the weekday, then I will kind of make up for some lost time on a Saturday. But most of the time, no. Hey, I read the firm by John Grisham. I know 120 hours means you work on Saturday and Sunday. And Bain is one of those John Grisham firms, right?

Like not really, but probably not owned by the mob. Maybe I shouldn't go that way. I don't know. What's a full day? Well, they said to expect an average of 55 to 60 hours of work a week, which is a whole lot more than 40. Yeah. And that average I've learned also, I think, includes that some weeks you're unstaffed,

which is kind of cool. You're paid to not do much. But those zeros, right, are being offset by even more than 60 hour weeks elsewhere. So 70, 80, 120. So I did have a few 80-plus hour weeks. and those were exhausting. And if you happen to really be enjoying it, like you're so interested in the case,

then that's cool. But sometimes you're not. Then that's not pleasant to be spending more time on something that you're not into. So, you know, there's a lot of pros and cons. That's my official opinion is like, you know, those intense careers in like big law or strategy consulting are often a great place to start a career.

But for many, not a great place to end the career. If you want to do other things outside of work with gusto. So that's one man's opinion. Others get really into it and are lifers and have no regrets. So as long as they're doing what they really want to do and what works for their values, then right on. Yeah, I don't think those people are listening to this show. But I welcome them.

If you know somebody who's working 120 hours a week, let them listen to this show. So I want to cover one more thing before we make it to The Famous Four. You said that when I was on your show, I said, oh, I just don't care what people think. And, you know, that's a great position to be in, if I do say so myself. But it's also taken me a while to get to that point. I have a 12-year-old daughter who is now currently, you know, oh, what do people think of me?

And I'm like, who cares? But, you know, being my age and saying who cares is very different from when you're 12 years old and saying who cares. And there's this like so spot on wait but why cartoon where it says what you think people are doing. And it's you standing in the middle, surrounded by people. And I'll link to this in the show notes, which can be found at biggerpockets.com slash Money Show 77. It's you, it's like a stick person standing in the middle, surrounded by all these people who are like, ooh, let me look at him.

Let me look at him. Followed by what's actually happening is you standing there and everybody else is looking at their phones. Right. Nobody cares. Like ultimately, the people who said, wow, you don't have a car. ultimately it's not going to change their life if you get one or don't get one. So do what's best for you. Right on. Step down from my soapbox. Okay.

Preach it. It is time now for the famous four questions. These are the same four questions that we ask of all of our guests. I'm sorry, four questions and a command. Are you ready? I'm fired up. What is your favorite finance book? You know, you just had him on, and it was Ramit Satis. I will teach you to be rich. I read it shortly after it came out and really opened my eyes to automation and some of that concept of, as he put it, to mercilessly cut what you don't care about and then lavishly spend on what you do. You know, made me feel fine about, you know, lattes or whatever and making my choices. That worked for me.

By that great book. That's a great book. and that episode was episode 73 of the Bigger Pockets Money podcast. That was a lot of fun. It was nice to talk to Rameet. All right. What was your biggest money mistake? Oh, boy, it's embarrassing.

I lost over $30,000 doing options trading. And it's because a guy I know, respect value, he's brilliant, said, hey, I'm making some money doing this. I was making some money in the first couple of months. But, hey, we didn't fully understand the ins and outs of, of what we were doing. And then later, we realized that our options brokerage was being run by a fraudster who featured on an episode of American greed.

And he's now in prison. So I felt real dumb on two levels. Like, understand what you're putting your money into is pretty basic. But I got seduced by, oh, this is a clever opportunity we've discovered that others don't know about. Well, it sounds like it's my Chinese fruit juice company. in a different kind of vein there. It's the whole gambling,

trying to speculatively make a couple of quick bucks on some things when there's a time risk included in that as well. Yeah, well, don't beat yourself up too much about that because you only lost $30,000. There are lots of people who lost significantly more doing things that they don't really understand. And, you know, shameless plug for bigger pockets,

that's kind of why bigger pockets exists. We want to help people learn how to invest in real estate so they aren't making these silly decisions such as renting to a professional tenant or, you know, not doing a background check or trusting their gut when it came to renting. Oh, they said they were, you know, they seemed really nice. Yeah, they always seem really nice until they stop paying the rent. Okay, again, stepping down from my soapbox. What is your best piece of advice for people who are just starting out. Well, you know, we kind of covered it, but I would recommend that you take, you know, even just three minutes right now and get a rough sense on what is that dollars per hour number. And that will just begin illuminating all sorts of things in terms of, wait a minute,

why am I doing this and not paying someone to do this? And why am I paying for this? I'm not doing it myself. I think you'll have some aha moments on both sides of that coin once you're clear on the number. I think that's great advice. I'm going to, I'm going to mention that in the intro as well. Well, thank you. All right. What is your favorite joke to tell at parties? But you know what? This is a tricky one.

And I know you're fond of the puns. Great jokes. You kind of just already did it with all those vacuum cleaner jokes in the beginning. And so these might have even come up. I'm not positive. So there's a couple. Here we go. What is a houseware?

I don't know. What is a houseware? Address. Address. Oh, nice. Nice. Nice. And your kids are under two.

That's right. My dad sent me a joke the day. He said, why couldn't the bicycle stand up? It was too tired. Four-year-old said this. So I'm putting a selfie with you wearing my tissue. It has a bicycle on it that says, I'm too tired. Sing.

Oh, well. That four-year-old will have to kind of come up with some better stuff. What do you mean? You wear a shirt with that joke on. it. So I've already got it, right? That could be that shirt, Whitney. Okay, Pete, tell me where people can find out more about you. Oh, sure thing. Well, my epicenter headquarters is Awesome at Your Job.com, but probably the fastest way to get there in your podcast app is just to search awesome space job. And you'll see, we've got a ton of great stuff

for folks who are looking to sharpen the skills required to flourish at work. We had Mindy on. And yeah, We'd love to hear from you there. Yeah, that was a really fun show. That was a little different than some of the other podcast episodes that I normally do. And I really enjoyed, as a podcaster, I really enjoyed your level of preparation. Well, thank you. And you can see, if you're a podcaster, you can see his level of preparation when you speak at podcast movement this year. That's right.

I'm excited. With another former guest, aren't you doing it with Rich Jones? That's right. Rich Jones and I, we're speaking together at podcast. movement. It'll be a fun one. So Rich was on episode 56 of our podcast. You're good for those episode numbers. Yeah. You know what? I have a lot of space in my brain. There are some things in there that I don't have that some other people do, like the ability to instantly do math. Okay, Pete Michaelis from How to Be Awesome at Your Job Podcast. Thank you so much for coming on the show today.

I really enjoyed this. I really, you know, I need purpose. permission to pay somebody to clean my house. And I feel much better with your explanation of how to go through and just figure out how much money you're making, how much money you could be making if you weren't cleaning your house, which is something you hate. So thank you. I personally got a lot out of it. And I hope that our listeners do too. I know they will. This was a great show. Thank you. Oh, thanks, Mindy. Thanks, Scott. It's been a lot of fun. Okay. And we'll talk to you soon. All right. That was Pete McItis from the How to be awesome at your job podcast. Mindy, what do you think? My biggest takeaway from this episode is just,

it's okay to hire it out. And that, like I said at the beginning, that's really difficult for me sometimes because I can do it myself. Why on earth would I pay somebody? Well, because there are other ways for me to generate money besides just being here, no offense, that I could do if I didn't have these stupid cleaning my house tasks all the time. And I'm not like Pete, I'm not going to hire anybody to wash my clothes, I think that's weird. But I guess I am judging him. But I'm not really judging him. Like if you want somebody else touching his underpants, that's fine. I don't want anybody else touching my underpants. So that's kind of a weird thing for me. But I also don't mind doing laundry. But I really hate cleaning my house. And this is, you know, the way he explained,

it was really, really, really great. And there's so many things that you can apply this to in your life. Once I get comfortable paying somebody to clean my house, I'm probably going to get comfortable paying people to do a lot of other things for me too. How about you, Scott? What was your biggest takeaway? Well, I think from a really high level, I think, that this was a business podcast in a lot of ways, right? There was personal finance elements here, but really he was applying business concepts to how could he become an entrepreneur who could use that entrepreneurship to design a lifestyle he really loves. And he clearly loves his life and knows exactly where he wants to be spending his time and exactly the value of his time. And I think

those were very powerful concepts. When I think about financial independence, I think a lot of our listeners are looking for an endpoint, hey, I am going to reach this. number with this amount of passive income or this net worth relative to my spending. And then I am going to be complete on my journey to financial independence. And then I will do something else. And what Pete did was, no, he was just like, hey, I'm going to accumulate runway as fast as I can, this $40,000 in cash. And then I'm going to go take a shot at what I want to do. And I can do that and be comfortable with it and have high probability of success of building the life that I want much faster than a financial freedom trajectory

because I know what my burn rate is. I know I've got cash to fund that. And I know that within a year or 400 days or however long he had, he was going to be able to generate enough revenue to offset that. And that comes down to basic, basic mathematics, right? What is my daily burn rate? How much money do I have? What is the value of my time?

How do I generate income? How do I generate free cash flow? all that kind of stuff. He figured it out and he's been able to live exactly the life that he wants as a result of that. Yeah, he's still working. He's still, and he enjoys his job. He's probably back up to his initial income when he graduated from college, but he's enjoying his life so much more. And basically he took business practices and applied them to his personal finances. And that's awesome. What I like about this podcast and talking to all these different people is that, you know, what might seem second nature to one person is a brand new concept to somebody else. And like

you heard when I discovered that I could pay somebody to do stuff and I don't have to do it all by myself. But, you know, giving somebody the permission to do that is hugely helpful to somebody who might be stuck or, you know, oh, I've got to get to this number. Actually, I don't have to get to this number. If I shift a little bit, look, now I can get to a different number. And I really enjoyed talking to Pete today because it was very eye-opening. And one concept that I've been struggling with for a really long time, this is, you know, because I do a similar exercise, right? I kind of know the value of my time and what I should hire out, what I shouldn't. But I was really struggling with this concept of, okay, what's a P-Tax? What's a post-tax? You know, how do I make that comparison? And it's so

beautifully simple. It was so easy. He just answered that for me. Business expenses are pre-tax earnings and are associated with your pre-tax earnings and personal expenses are associated with your after-tax earnings. It's so easy. I don't know why that was so difficult a concept for me to get. And that's exactly what I needed for some of the things in my personal life that I've been debating. Do I do this? It's going to be terrible. Do I hire it out? I don't know. My yard is full of weeds and it's going to take me back-breaking hours of back-breaking work and I have my answer after this episode. Pete McItis, changing the lives of Mindy and Scott.

That's right. All right. Okay, Scott, should we get out of here? Let's get out of here. From episode 77 of the Bigger Pockets Money podcast, this is Scott Trench and I am Mindy Jensen, and we are encouraging you to go change your life too. Live your bliss.

Follow your bliss. The end. Goodbye. Thank you for listening. Bye, everybody. Bye.