BiggerPockets Money Podcast - Money with Katie: Breaking Free from the Middle-Class Money Trap

Episode Date: June 10, 2025

Katie Gatti Tassin from "Money with Katie" escaped the middle-class wealth trap of endless working and spending by having her "financial awakening" early. Through just a few years of self-education she more than doubled her income, built a profitable business, and mastered retirement investing and passive income strategies. She's documented all of these wealth-building strategies in her new book "Rich Girl Nation: Taking Charge of Our Financial Futures," which you can pre-order today.  You'll learn the exact mindset shifts and actionable steps that transformed Katie's financial life and how you can replicate her success to break free from the cash-gobbling cycle and skyrocket your own net worth. In this episode, you'll learn: The “financial awakening” that’ll have you saving more and spending less Tracking spending in real-time is crucial for financial awareness.  Financial “truths” that could destroy your wealth if you follow them Earning more money requires smart strategies, not just hard work. And SO much more! Learn more about your ad choices. Visit megaphone.fm/adchoices

What if the biggest threat to your financial independence isn't market crashes or job loss, but the mental traps that sabotage you before you even realize it? Today's guest has cracked the code on the psychological and strategic mistakes that derail most people's FI journey. And she's here to share mindset shifts that could save you years of frustration and get you to financial freedom faster than you ever thought possible. Hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen.

and with me as always is my fire fanatic co-host Scott Trench. Thanks, Mindy. It's great to be here with my rich girl co-host, Mindy Jensen. We're talking about that all day. 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 financial freedom is attainable for everyone, no matter when or where you're starting or whether you're held back by the dreaded pink tax. And some of those items that I know Katie is super. Our guest today is super familiar with. Today we are so excited to welcome Katie Gotti Tassin back to the Bigger Pockets money podcast. As you may know, Katie is the founder of Money with Katie. All of her content there focuses on building wealth, questioning conventional wisdom,

and creating a great life. Katie is a genius, a thought leader, a writer. She loves to put in these really long form posts on Instagram that go into philosophizing. I'm usually there deep in the comments arguing with someone on there. And you can order her book, Rich Girl Nation, rewriting the Rules of Wealth for a new generation that is focusing a lot of those same concept she talks about all the time in her content. We can't wait to discuss this with you. Welcome to the show, Katie. You know what? It is so great to be back. Thank you for having me.

And I just have to say, I love your mission, a million millionaires. That's so inspiring and very empowering. I love it. Thanks. We just did an analysis and we're actually going to have to update the goal now because we think we've achieved it. No kidding. We did the math. We said, right behind me is the number of people who've ever signed up for BP, bigger pockets. And that's 3.17 million. And we know that 29% of them are millionaires for pretty robust survey data. And that does not count the bigger pockets money audience, which is another several million over the years. So we think we've easily rounded that goal without officially tallying it with just the current members. So that's a fun one that we've passed. Congratulations.

Well, you're probably pretty close to that with your audience there. Oh, my goodness. I would hope so I wouldn't even know how I would begin to check something like that. But I do think that it's, I love that because it's so illustrative of just how as individual people with passion and interests, we can have that crazy ripple effect. I mean, that's amazing. Yeah, the goal is just to be a small part of the journey for one million millionaires. And I think, you know, that's kind of cool. So I think, though, that the two and a half million isn't a new million.

So two and a half, two and a half millionaires. Is that what they're saying these days? Gosh. Yeah. So going back, we last had you on Bigger Pockets Money on. episode 341, and you mentioned you had a financial awakening in 2018 that changed the trajectory of your life. Could you kind of repeat that, summarize that experience for us for folks who have not gone back and listened to that episode? And give us a kind of crash course on what's been

going on for you since we last spoke. Sure. I'd be happy to. So yes, this financial awakening, I mean, it was kind of multiple steps, but I do write about one of the critical pieces of that awakening and the introduction for the book. And this is kind of why I keyed in on the one million millionaires thing because of a big piece of the work that I do now and that I think is so important is kind of this concept of bringing others along for the ride. And in 2018, I had a friend at work named Kylie who invited me along to the Money Diaries book tour stop in Dallas, Texas. And it was like a Tuesday night and usually I didn't go out on school nights. And I was like, ah, okay. I had already started getting interested in money at this point. I'd been having some

conversations. I think I might have found choose FI by this point. I can't quite remember. But this was really the first time that I had ever gone out and attended an event with a bunch of like-minded people that wall-to-wall with women that wanted to talk about money and that were interested in money. And it was just totally electric. And I left that night being like, oh my gosh, I want to know everything about this. And that really sent me on a path to learn everything that I could. And I, as part of writing the book, went back on my old blog to kind of see, like, what were some of the first things that I was writing online? Like, when did I go to this event?

And then how soon after was I talking about this publicly? And like within a month, I'm on my old blog, my old website, just so overzealous, so insolice, so enthusiastic being like I am learning things that are absolutely blowing my mind. It has completely transformed my relationship with spending and with instant gratification and all of these things that I think I had never really been exposed to before. And just this, it opened my eyes to this kind of new way of designing your life and, and designing your money. And from there, we were just totally off to the races. So since then, I guess the last time I was on the show would have been 2022, is that correct?

2023? It's been a couple of years. Yeah, since then, I've been running money with Katie and really exploring all the different aspects of, I guess, my interests and not just personal finance, but the economy and the way that money plays a role in our culture and class politics and all of these things, just really widening the aperture

and exploring anything that really peaks my curiosity. But part of that, you know, 18-month, two-year time period was writing this book, which was really my attempt at distilling all of what I believe is the best advice and the most strategic path for any woman who is serious about managing her money and planning for her future. So that's been really exciting. And it is basically here, which is hard to believe. You just said once you went to this meeting about with like-minded women, You were starting to talk about money on your website.

And you said the things I'm learning are completely transforming my relationship with spending. And that's one of the biggest, I don't know what the right word is. Problems issues is that people are so used to spending. You were spending on, you know, you were the hot girl. You were spending money on the hot girl hamster wheel to try and like you. And you say in your book you were spending money on like your haircut and color were $200. I can't remember the frequency every three months. Yeah.

I knew a girl who did 175 every three weeks because she had very, very short hair. Yeah. Meanwhile, Mr. Money Mustache is out there with his $10 universal men's grooming device. Yeah. The seven and one body wash. Yeah. But so what were some of the things that you learned that transformed your relationship with spending?

Because I hear from a lot of women, especially, you know, younger women. not throwing you younger ladies under the bus, but I hear from a lot of younger women. Well, it's my time to have fun now. I just got out of college. I had to be super frugal then. I want to spend money and get my eyelashes done and get my eyebrows done. And I mean, I do need to get my eyebrows done because it's nice to have two instead of one.

But that's, you know, that's an easier thing to spend money on because it's like 15 bucks or something. But all of this, like you were spending, what, $3,000 a year just to look good. And you look good now. Oh, well, thank you. Thank you very much. I wish I could go back until 2018, me that. Yeah. Yeah.

So I kind of want to take this in two parts. The first is what was it that I learned that transformed my relationship with money and was spending and with instant gratification? Because I think that that was really the main driver of the bigger shift. And I think part of it really clicked for me when I started to understand that, a dollar spent today versus a dollar saved today are not equal. I used to think, okay, I can either spend this money now on this thing that's going to bring me joy immediately, or I can save it and have the same amount of money in the future, question mark, like, all right, well, then I'm just

going to spend it now. And I think once I started to learn about some of the foundational fire concepts, particularly the 4% rule, I started to see that, oh, okay, no, it's not a dollar now or a dollar later. It's a dollar now or $10 later. And I think that some people, that realization is enough. Like they're the type of personality type where they see that benchmark or that goalpost and they will, it kind of immediately clicks and they just want to run toward it as fast as possible. That was really the experience that I had. And so once I started to understand compounding. We were, I mean,

that's all she wrote, frankly. I was like, all right, I want to get there as fast as I can. And it was fun. Like, I think that that was the big thing was the kind of fleeting thrills of consumerism that I had been benefiting from before, really paled in comparison to watching line go up. And so I think line go up can be kind of a trap of its own, and we can get into that.

But at the time, I mean, that was really what I needed to get it together. on the concept of the hot girl hamster wheel and spending on beauty. I call this the hot girl hamster wheel. And I think many women who are on this hamster wheel will relate to this. Or if you are a guy listening who's like, huh, hot girl hamster wheel, maybe your wife, your sister, your daughter will relate to this. But this is how I describe. I think the way they can relate to that is that's the $45,000 pickup truck with

that's check. Except this is even more insidious because it's the litany of recurring expenses that are necessary to uphold what I will jokingly call the capital A, capital F, like acceptable feminine appearance. Now, it's a hamster wheel because the nature of these purchases is such that you cannot just do them once. Anybody who has ever gotten their hair highlighted, anyone who has ever gotten acrylic nails put on, you know that it looks really, really good for like maybe a couple of weeks. And then your body starts to reject these enhancements. And you now have to do something about that. The grown-out highlights,

look worse than just un-color-treated hair. The untreated nails look better than the acrylic nails that are grown out. So I know I'm being very specific, but the point is that there is this insidious kind of coercive force that keeps you there because it's not as easy to just be like, okay, I'm just going to stop cold turkey because now my hair looks worse than it did before I started. Now my nails look worse than I before I started. So you mentioned that I spent $3,000 per year on beauty.

That's true. that represented roughly 10% of my take home pay at the time. And that was a real revelation for me because I was like, whoa, that means that I am working for almost an entire month every year just to look good. And that was a wake-up call for sure. But it turns out that your average woman does spend somewhere in the ballpark of around $300 per month on beauty and personal care. Now, bear in mind that was back in 2017. So pre-aesthetic boom in the cosmic.

mesutical world, the Botox, the fillers that are far more ubiquitous now and most ubiquitous among young women. This is a kind of unspeakable opportunity cost from my perspective. I think we've gotten really, really good at talking about beauty and beauty standards as being psychologically oppressive, but I do not think that we've gotten very fluent yet in discussing them in the terms of being financially or economically oppressive. And so it's something that that I want to call attention to because over the years as I was learning about these things and parsing it for myself, I didn't really see many personal finance blogs, podcasts, whatever, going into very much detail about these things. And it was really one interview on Shoes FI

with Mrs. Frugal Woods where she was talking about like, why would I buy makeup when I could buy my freedom instead that I was like, whoa, I've never heard a woman like address that so head on. So I look at investing in your beauty and that social capital of being beautiful as over time just a losing proposition. We know that actual capital grows in value over time. Beauty is a depreciating asset. It's something that will constantly require more cash flow to maintain. And it's only going to get worse over time because in our culture, beauty basically means youth. So that's not a good ROI to me.

It's not a good place to be wrapped up in or to be constantly on that hamster wheel. So that's why I start the book there. And it does come mostly from personal experience with that. The book's goal, I think, you know, as I read it, is to achieve financial independence, right? I mean, a huge percentage opposite the back third of the book is really dedicated to this concept of the 4% rule. And the savings rate needed to achieve that and the specific strategies and use of tax advantageed accounts in there. So, you know, and I think that makes perfect sense to me. That's what we talk about day in and day out here.

Those are well-established components here. Walk us through how important, I mean, this is clearly an issue, but give us an idea in the pie of spending from an average American household, maybe a single household led by a single woman, for example. What is the damage done by this dynamic and disadvantage for women as compared to men, for example, in achieving that outcome? Yeah, well, you know, let's say that over a 40-year career, you do keep up that $300 per month average spend. Hell, pretend it never even goes up with inflation.

Pretend these beauty treatments and these services never go up in price and you are just clocking in at $300 a month. If you are assuming average historical returns, we are talking about an opportunity cost over those 40 years of a million dollars. So we're not just talking about costs at the margins. I think sometimes it can be easy to slip into that trap of kind of dismissing these. Who cares? It's like the frivolous treats, whatever. These are retirement supporting amounts. I mean, there's no way around that.

And I think if we lived in a world where financial autonomy and financial freedom was something that was ubiquitous that we all achieved, I'd be like, yeah, who cares? But we don't live in that world. We live in a world where, you know, half of people retire with basically nothing. So I think it's really important to look at these things seriously and like look at where women's money is going. And I totally recognize that and I kind of talk about this in the chapter that sometimes when we talk about these things, it can be misconstrued as like it's a lose, lose or like, oh, you're damned if you do. you're damned if you don't because these beauty standards exist and you know you probably leave your home and receive signals every single day that the way that you look matters we know in the like there is research that shows that attractive people do have easier lives like they are treated

better that's just true so like it's not like it's all in your head and that there's no ROI to investing in the way that you look but i would argue the ROI is poor compared to an extra million dollars in retirement and that these choices that we make as individuals do not just affect us. Because the way that beauty standards work is the more women who strive to uphold a particular beauty standard, the more normalized that standard becomes. And then the more incremental pressure is exerted on every woman who looks at you to kind of try to strive for that standard too. So I think it can be very powerful to recognize that in opting out of some of these things, you are actually lessening the pressure on other women that you may encounter in your day-to-day life

to have to, you know, jump through that hoop too. We have to take a quick ad break. But while we're away, we would like to ask a favor. Can you please hop on over to our YouTube channel and make sure that you're subscribed? YouTube.com slash bigger pockets money. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening.

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member FDIC. Don't put this one off. Join thousands of small business owners who have 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 Leaner Stronger for Fitness, the Anxious Generation for Parenting Perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being.

What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. Welcome back to the show where I have a conversation with two rich girls. When I think about the differences, and I'm not an expert on this by definition, so I'm asking, but this is, I'm asking by opposing hypothesis and asking you to reject or support it with this. But I would hypothesize that the biggest barriers in order for women achieving financial independence versus men are,

one, the gender pay gap. Two, this dynamic you just discussed here, the hot girl hamster wheel. I called it the pink tax earlier. Sorry about that, but that concept. And the third, I would say, is this kind of maybe this educational aspect where there's a societal norm that is changing, I believe, but it has been there in the past where many, perhaps in many households, men are just assume the role of managing the money in more of a direct way than the many women in there. Is that a rate my hypothesis.

And if you agree with it, let me know what you think about those and how to fix some of those issues. Well, I think that that's pretty close. I sat down to write the book, I wanted to, it was basically spurred on by learning that the wealth gap is much worse than the wage gap. Women have, I don't know, something like 55 to 57 cents in median wealth for every dollar that the median man has. That's, I mean, that's substantial. That's pretty serious. And so I set out to figure out what are the most pressing drivers of that wealth gap. And you're right, you hit on a couple big ones. I think the hot girl hamster reel is a very particular manifestation of what I would consider just kind of like the increased pressure

that is exerted on women to spend in different ways and to kind of at the risk of sounding crass like piss away any capital that they do get on other things. I think the gender wage gap is inextricably connected to the motherhood penalty and the caregiving gap. So I think that that's the one piece that I would fill in some color there. I spend a lot of time in chapter two of the book, which is primarily about earning more and finding ways to increase your income, because as we know, income is the lifeblood of wealth building. You really can't do it without working on increasing your income. At least you're going to have a lot easier time if you can increase your income. And so I spend a lot of time digging into essentially what is the driver of this?

wage gap and why do we see this? And I think there is a bit of a misconception that when we talk about a wage gap, what we mean is that, you know, there are men and women out there that are doing the exact same job that are being paid differently. And that's not really what's happening. It's a little bit more complex than that. I mean, that does happen in some industries. There are some particularly egregious examples like surgery, for example, where the controlled gender wage gap is something like 10%. But by and large, it's more so about the way that men and women's lives, unfold over time. Some of that is downstream of policy. Some of that is downstream of cultural norms. But I really appreciate the work of the Nobel Prize winning economist Claudia Golden

on this stuff. And that is basically that the wage gap widens for women as they progress in their careers, as their family responsibilities become more significant in their lives. So I think that talking about it in that context and kind of understanding that a wage gap in the professional world is probably actually related back to how that person is spending their time within the domestic sphere. That is really critical for understanding how we fix these things. It is true that men work more paid hours, roughly one more hour of paid work per day than women do. But we know that women are spending roughly twice as much time doing unpaid domestic labor in their homes. And so what is the natural result of that? Well,

women are going to end up with fewer resources. And that is what we see. Then I think the other thing that's worth looking at is just kind of the boring morbid reality of lifespans, that women do live about six and a half percent longer on average, which means they are statistically more likely to bear the brunt of poor financial planning. And because of what you mentioned, Scott, about kind of the cultural societal norms around who is considered the de facto money manager in many households, even households with millennial high earning women who are more likely to defer that long-term financial planning to a male partner who knows if he's good at it or not. I mean, like, that's kind of a crapshoot, that they're going to be more likely to

bear the brunt of that poor planning and probably not even realize that the planning was poor until it's too late. So I basically look at all these obstacles and I go, how do we know that these are affecting women's outcomes? Because we can see it in the data. Because women retire with 57% as much money as men do. 84% of widows in the U.S. are women. So even happily married women who go their whole lives, they never get divorced will still need to manage their money on their own at some point. will still need to know how to do that. So I do think that the knowledge gap is a critical piece and is why I spend all of Chapter 3 kind of trying to fill in the gaps.

But yeah, I mean, it's a complex problem. And I think it's so much bigger than kind of subjective bias or some of the more popular talking points, I'll say. It's much bigger than that. And I think that getting our arms around it is important for how we start to solve it. I have my, a couple, a couple reactions this. First, I have my, wow, I'm talking to a true master who has all their facts and figures in place and all their frameworks well rehearsed, has really thought about this and is clearly put in the 10,000 hours in studying this problem. So awesome. On there, that's my, that's my little smile I get when I talk to people that are this well-versed in their subject matter. Oh, thank you.

Second, I'm just, I'm laughing because I know women live much longer than men, but I am in the lucky cohort because I have two daughters. Oh, let's go. I will enjoy many of those longevity benefits here as a man, apparently, on average. So apparently that extends male. Is that a thing? If you have female children? I believe so, yeah. Wow.

That's what Virginia tells me. I'll have to go confirm that with some detailed research here. Let's go through these three. If we agree that those kind of, it sounds like you agree that those three, that's a reasonable way to articulate the problem with those three frameworks, right? The gender pig app, the hot girl hamster wheel slash pink tax, depending on what term you're familiar with for those listening. And then this educational gap or maybe, it's the wrong word, but I'm going to use it, this abdication or allowing the male partner

to make all of those decisions and not really investing the time, maybe, to learn about that. How do we solve this? What are kind of like, how do we distill those problems into three, maybe headline takeaways? Is it stop paying the pink text? Stop, get off the hamster wheel. don't worry about it? Is it read a bunch of books? Is it negotiate with your boss? Like, what are those? How do we?

Yeah, I mean, all the above. Read Rich Girl Nation, babe. But no, I think there are a couple things that I would say to start with. If you find yourself in that position where you're like, ooh, this is kind of resonating. And I do kind of feel like I've experienced these things that this crazy lady is yammering on about. I really structured the book in such a way that I wanted to kind of chronologically take somebody through the considerations that they're likely to face them will be most impactful for them. So starting with the Hot Girl Hamster Wheel, the broader conversation there is what are you spending on and are you spending on things that you genuinely value and that are essentially supporting you rather than you supporting, maybe systems or ideas that you don't necessarily agree with.

I think the big overall word there is like consumerism. Are you engaging in something that like maybe mentally you're not really supportive of? Then we move into earning more money, negotiating for more. And I am of the mind based on many conversations that I've had that most people who find their way into the space and find their way to a book like this are probably pretty hard workers. and I am always reticent to tell somebody like, well, you just need to work harder. I think that there are certain ways that you can work smarter

such that you're going to make it way easier for yourself when you go into those important negotiation conversations and you are asking for more money. Then we move into, okay, so you've looked at the spending, you've increased your income, you're working smarter, right? You've had that successful negotiation conversation, maybe you've started a business, maybe you've changed companies. Now you're really going to learn the ins and outs of how financial freedom,

how attainable financial freedom is for you based on these two factors. Because if we know you're spending and we know your income, good news, we can tell you how long it's going to take you pretty much down to the year to achieve financial independence. And once you have that very powerful knowledge, you can now make even better decisions about, okay, well, it's actually much closer than I thought. So I'm going to let my foot off the gas a little bit. I'm going to prioritize something else.

Or, oh boy, this is quite far away for me. I didn't realize how long this road was going to be. I need to go back to one and two and either cut spending more or increase income more and make some other changes. And then the back half of the book, as you alluded to, I get into a couple things that I really think are important for women in particular based on what we know about what happens to women when marriages end. So I have a chapter that's all about basically managing money as a team within a marriage and how you can do that in like the most balanced way of morale boosting, but also legally protecting yourself.

I think that's critical. And then, okay, now we're thinking about children, right? So what do we, if we know that childcare is going to cost this much in this many years, like how do we need to start saving and prepping for that now? Where should we be saving that money? What should the strategy be? And then finally, we conclude with, all right, great. So you've navigated these big classic pitfalls. Now we want to make sure you don't outlive your assets.

We want to make sure those assets outlive you. So how can you, again, work smarter, not harder to invest as efficiently as possible? So that timeline that you're on is, you know, if you're being as tax efficient as possible, probably you'd be about 15% shorter. That's really important, right? We know the path. Now we want to start looking for shortcuts. So that's kind of how I would lay out the big things.

Like, let's focus on the areas where we know we are statistically likely to have the most challenging obstacles thrown our way. Let's focus our energy on those things. All right. This is our final ad break. And we'll be back with more after this. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and future planning together in one dashboard on your phone or your laptop.

Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch, keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all in one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code pockets. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. you can stop struggling to get your job notice on other job sites.

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And with Northwest, privacy is automatic. They never sell your data. And all services are handled in-house because privacy by default is their pledge to all customers. Visit Northwest Registeredagent.com slash money-free and start building something amazing. Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money-free. Thanks for sticking with us. Katie, I really love how you started with what are you spending on. Do you genuinely value those things first and foremost?

Because it doesn't really matter how much you're earning or, you know, what flavor of fie you're pursuing. If you're spending everything that's coming in, it's going to be really hard to save money. And this, I love that you call it the hamster wheel because it really is a hamster wheel. So first and foremost, like people, I get this question all the time. What's the first thing you would tell people that are, you know, want to change their finances? look at what you're spending, track your spending, see where it's going, and track it every single penny. And track it in real time is what I would say as well. Because when there are ways, you know, oh, let me just go and look at all of my credit card receipts from last month.

Well, that's great. That's already happened. You can't make changes midstream when you're at the end of the stream. So you need to go and track it in real time. Well, I mean, we've all heard that analogy with the bucket with the holes in the bottom. I mean, I'm sure you all have encountered this situation too, where you meet someone and they make $200, $250,000 a year. And they're like, oh, I don't know where all the money goes. I live paycheck to paycheck. I am so grateful that I discovered fire and fie when I made like $50,000 a year.

Because I set that baseline for my spending so low that I was like, oh, okay, now, every incremental amount of income is just going to get dumped into this fund for the future. And that's not to say that there hasn't been lifestyle creep. There absolutely has been, especially with the inflation that we've seen over the last few years. I certainly spend more now than I used to. But I do think that there is a real, there's a real value in learning about these things when you already know that you're capable on living with less. because once you let that lifestyle creep genie out of the bottle,

it is very hard to go backwards. It is hard to downsize. And so I think in many ways, somebody that finds that path earning $60,000 year is in many ways going to probably be a little bit better off than someone who has already like allowed the lifestyle to expand to fill the high income. And then it's like, oh, crap, now I got to figure out how to start undoing some of this.

Just on this note, There's this fascinating statistic I came across recently where there's this conception that the top 1% of income earners are this elite class of people and it's really hard to break into in that. But 12% of Americans will earn a top 1% income and almost nobody will stay in the top 1% less than 1% of the people who make it to the top 1% will stay in the top 1% of income generations for more than a decade. Oh, wow. And so this is that one, the elite income generation world is not some static environment in there. And that's true all the way at the very top too. The same same general rule applies for the top 400 earners in America at the very, very tippy top. And I've just, I've observed in my life, and I think, you know, maybe other people can, can, you know, share this if they, if they've experienced it for themselves.

But when you observe a family that goes through forced lifestyle reduction, The percentage of the time it destroys that family is absurd, right? It's just, have you ever noticed this in your life where that's the catalyst for just really big pain in that environment? And I think that's what you're saying here, that the stakes for setting the spending as low as possible, keeping it there and never going beyond that because it's really hard to earn an elite income. It's really hard to, it's almost impossible to sustain it. Almost nobody in this country does that over the course of decades. and keeping that spending low, building the asset base, focusing on wealth and spending only a small percentage of your wealth on an annual basis, I think is the way to avoid that

trap in a more fundamental way. Yeah, there's a formula that I include in Chapter 3 called Don't Live Beyond Your Assets. And I think in a way it's kind of inspired by you're connected to the idea that you're talking about, which is that high incomes can be fleeting. And they often require a lot of work to get and then to sustain. And, you know, most of us, at least if we're trying to build the asset base, are not interested in working 80 hours a week for our entire lives. We might be willing to do that in sprints or to make progress,

but that's not the end goal. We don't want to do that until we're 60 years old. And so I talk about how sometimes when you first start to earn a lot of money, you can kind of get starry-eyed about like, oh, money kind of starts to feel a little worthless or like meaningless. or there's always going to be more because there's another paycheck coming in that's, you know, for me at least, when I became a higher earner, it was like, oh, it's like more money than I could ever spend. This is great. And you kind of stop thinking about

it as hard. But I have, you know, in that, in that period when I went through that transition, really was looking for some sort of heuristic that I could use to be like, what is actually a safe amount for me to, you know, for me to spend? I don't want to cling to the lifestyle that I was living on $60,000 a year because I do feel like I want to go up a little bit, but I don't want to jeopardize my future in expanding my lifestyle. I want to be very intentional about it. And so I thought, all right, I'm not going to base my spending decisions based on my fleeting and subject to change income. I want to base it on how much progress have I already made to FI. So the formula that I came up with was around 4% of your current invested.

assets averaged with your current income. And then looking at that and going, all right, that is probably like the absolute upper limit that I should be safely like indulging. And I didn't end up getting very close to it. That's an awesome formula. Yeah, it's just I think the using the 4% of the current invested assets kind of grounds you in the reality of like, hey, now let's not get carried away. And it, it has been useful for me. It's kind of like a checkpoint in my head of like, all right, I'm not getting too close to that. that am I and obviously as you as your net worth continues to grow that number will go up too because I think the opposite is also kind of a trap of like you know I never want to be the person with like 10 million

dollars who's afraid to take a vacation like to me that's also losing the plot so I don't want to lose the plot anywhere on this spectrum I want to be grounded in the reality of my situation what is the difference between lifestyle creep and identifying with your net worth This is something that I have struggled with personally. Oh, yeah. And I think that I'm spending $40,000 a year. And then you get to the end of the year and you're like, well, that wasn't accurate at all. However, I can afford it.

So I shouldn't feel guilty about it. We in the FI community talk about don't let lifestyle creep hit up on you. But then you are the $10 million net worth person who takes the. super cheap vacation and flies standby and, you know, all that things. Yeah. You laugh. But when I was on the Rameet safety podcast with my husband, I got a lot of people reaching out to me saying, I am in the exact same position you are in.

Or like my net worth is way more and I can't even spend as much as you. Like there was so many people saying I totally identify with this. And I think that on the one hand, don't let lifestyle creep affect you is really great advice for when you're in the beginning of your, and your $50,000 a year job and you're in the beginning of your journey where, you know, you really, oh, you just got to raise, stick with the $50,000 and put that extra in your emergency fund or pay down debt or put it into investments or wherever your investment plan that everybody should have is going. But then after a while, you need to start identifying with your net worth a little bit more. Where's the tipping point

where you're no longer letting lifestyle creep drive you and you're now starting to identify. So I'm not sure, Mindy, if this is going to resonate with you or if this will be kind of what your experience was. But I think for me, the big, and this is, I kind of alluded to this earlier when I was talking about the line go up. The line go up mentality and being very committed to that can also be a trap of its own. But I think for me, money became a bit of a scoreboard. because realistically I had more than I needed. I was not, I was good. You know what I mean?

I was fine. And I think that I started to look to the money to tell me that I was doing a good job and that I was successful. And when the line was going up, it meant I was successful and I was making good choices. And if the line was going down, then that meant the opposite. And that's a very, that can be a very powerful motivation in the beginning. I always tell people that are starting, you need to track your net worth. because when you see that number going up, boy, let me tell you, it's going to be very motivating,

and you're going to have a lot easier time sticking to the sacrifices that you might be making. So I think that it can be, it can be very useful in the beginning, and I agree. But I do think that sometimes line go up mentality, asking the money to affirm things about your identity, that for me became a bit of an issue. And I knew it was an issue because I was realizing that, my other values were taking a back seat. Other values being, I want to be a better writer. This is important to me. But the way that I was trying to determine whether I was a good writer is if like the business's revenue was coming up. And I had a coach be like, you do know that more

revenue doesn't mean you're a better writer, right? Like, you do know that those things are not actually connected. And I was like, huh, I guess you're right. I guess that's true. It's like really not the same thing, is it? Or I want to think about myself as a generous person. Well, I wasn't giving any money away. And it's like, well, it's kind of hard to think about yourself as a generous person who cares about others if you're just hoarding all of it for yourself. Like, that's kind of antithetical. So I think once I started to notice that my, my values were really taking a back seat, that's when I was like, okay, I need to like seek some, some guidance and some coaching. So I did hire a coach, someone who I could talk to about these things and who helped me to kind of break the,

um, break that, that natural connection that had formed between like, more money means. I'm doing good and less money means I'm doing bad. That was a very calcified connection in my brain from years of striving for financial independence that it started to get in the way. And I needed to let loose of those reins a little bit. That said, on the lifestyle inflation piece, I will share that personally speaking, I had moved into a much larger home when we were renting a home in California for our last duty station for the Air Force. And our housing expenses really exploded. We rented a house that was too much space for us. Anyone who's ever, I mean, it was in Sacramento, so desert, California, very hot, had very high ceilings. So the energy bill was just like, you, I mean,

you would gag. It was, it was crazy. 50 cents a kilowatt hour, just unbelievable. And so our housing expenses really got high. And we moved back to Denver. We were both like, I don't think we need that. think we need a single family home even. I think we should we should try something radically different. And so we downsized quite considerably. We moved into a two-bedroom apartment again. It's now smaller than the house that we lived in five years ago. And we are so happy. We're so happy. It was the best choice in our housing expenses got cut in half. So I think that there's also an important thing to remember that sometimes the better lifestyle decision for you at a given point in time or the lifestyle expansion, quote unquote,

that might actually be the better thing for you, doesn't necessarily have to cost more money. These things are not always one and the same. More is not always better. And so that's been kind of a fun lesson to learn of like earning more, spending, more experimenting, and then going, you know what, I don't really need all that. I'm actually going to, I'm going to quote unquote,

go backwards in the kind of the standards of like the American dream. And I'm going to actually choose something different. And it's been, it's been really fun and kind of cool to see like, oh, yeah, we can expand our lifestyle and then downsize it again and be happier for it. Okay. You said you hired a coach. What kind of coach did you hire? She, um, you're going to laugh.

I was looking for a business coach because I wanted to want to help me with tactics and strategies and whatever. And then after I interviewed a few people, the person that I ended up choosing is like, definitely builds herself more as like a life coach. And that is something that I was very skeptical of and kind of like, life coach or whatever. And I still kind of feel that way, to be honest. But not about her. I did hire someone who really could help me find those blind spots.

I think having that sort of objective third party person where in the beginning I set the expectation of like, I want you to call me out on my stuff. Don't let me get away with like you're, you'll know if I'm telling you what you want to hear. Don't let me. And that has been really, really valuable. We've been working together for like 18 months, and it's been great. We have people come on bigger pockets of money all the time with like a finance Friday. They'll bring us their financial information and say some version of which I do next.

And that's one of our favorite types of things to do. The biggest problem that we run into with a lot of these, and we had to actually set the expectation ahead of time before we got them on the show going for, because it's this big of a problem is they don't know what they want. Like there's just no goal to find at the end of the journey. So it's like, how do you, how do you help somebody plan financially for an ambiguous future? It doesn't make any sense. Once the goal becomes financial independence, okay, at this point in time, we can know how bad do you want it?

Do you want it so badly? You're going to move into a dilapidated jack and the middle of a cornfield? Great. We'll get you there in seven years on it. Do you want to do it with these constraints on it by spending this much or you locked into, you know, all that kind of stuff? You know, when you say you hired a coach, that is, there's almost never do you have someone who's got a coaching relationship like what you've got set up without that clarity of goals in place. Was that in place beforehand when you hired them?

Oh, it's a good question. Was it in place afterwards? And what are those? Do you know what you want in a fundamental sense? And does that make everything else easy to plan for? Yes and no. I think part of why I wanted to hire help. And again, it's expensive, right?

It's expensive to pay for somebody else's time. And so I did chafe at that a little bit because I was like, oh, I don't need this. You know, I can, I can find, I can talk to my friends. I can talk to my husband. I'll figure this out. But ultimately, what I was looking for really was clarity. I felt like I could go in a bunch of different directions. And I was having a really hard time picking which one.

And I think overall, the values that I had that I was trying to align my life to, I knew. It's, you know, autonomy. I want to be able to make decisions independently of the influence of, you know, I don't want to have to rely on money. That was important. Like I want to be able to make decisions completely autonomously. But it was also that, you know, I really want to like make my mark on the world. I want to make a difference in some capacity.

And I want to make sure that my work is always furthering that goal. I want to constantly nurture intellectual curiosity. I don't want to get complacent ever. And when I was starting to sense that my life was veering away from some of those values, that was kind of the alarm bell of like, okay, you need to do something that is going to get you back on the right track and prioritize the things that you say are priorities. Because right now you say those are the priorities, Katie, but really you're kind of just prioritizing making and saving as much money as possible.

And like that's a pretty easy path to stay on. If you're good at it and you like it, like society will just kind of patch you on the back for as long as you'll let it. If that's what you're doing, nobody really like will interrupt that level of success and be like, maybe you should kind of reconsider things. So yes, in a broad sense, I knew what my values were and I could tell something was off, but I really wanted to hire somebody who could help me find that clarity about where I

wanted to go next and how how I get there. Yeah, I will say this though, you know, I, you know, when I was 23, 24 discovering FI, like I didn't have all these answers to like what like what life wanted to look like whatever. So I pursued money. I pursued financial independence. And I'd do that again. I wish more people would, frankly, because, you know, like all these people have become FI and they become philosophizers, you know, and they've got this philosophy of life and all that kind of stuff. And that's a privilege afforded to people who are financially independent. That's not afforded to somebody who's not there in to buy in large. And so I actually, you know, I would say if you don't know what you want, become financially independent because you can spend the rest of your life

figuring it out. It'll probably change six times on you as well. But acknowledging that, there needs to become a point where you stop accumulating more. That cutoff point for me, I would say, is draw it at two and a half million on there. Where like there's no reason for most people, you know, maybe three and a half million if you're in California and to, you know, 1.8 if you're in Memphis, Tennessee, whatever, you know, just for your area that you want to live in or whatever. But once you get there, if the goal is still a ton more, probably something's starting to be wrong. Oh, wait, can I clarify something? So you're kind of a personal wealth, not limit, but kind of the point at which you would go, okay, if the goal post is continuing

to move something has gone off track here is around two and a half million? Well, I would say the goal in life is not to accumulate tens or hundreds of millions of dollars and miss out and the rest of right the goal but but it's really hard to enjoy it was really hard to experience autonomy as you phrased it if you do not become financially independent completely in life and so i just think it is a baseline requirement for for really you know for many people not like not everyone's this way it was a spectrum right but i think people listening this podcast will agree by and large that that that pursuit of that next phase begins as one approaches financial independence and that that privilege of being able to think the way that you think

and set your goals and think about those types of things. And the way I think I am in the, that's really a phase there, that grind is real. This number go up phase, as you called it, is a real price to be paid in America in 2025 to have the privilege of being able to visualize life that way.

And not everyone does it, but I just think for most. No, I mean, I think that makes a lot of sense. You're right. I mean, I never, I never had those bigger picture questions until that five goal for me had been reached. Because then you kind of get there and you're like, all right, what next? Like, all right, well, I guess I could just keep making, I could just keep trying to make that

number go higher, but to what end? And so, yeah, no, I totally agree. I think it's funny, the philosophizer. Yeah, there's just, there's just like, there's no autonomy. You have to show up to work every day or 40 hours a week for most people to live the lifestyle that is a baseline expectation of America, Americans in 2025, for years and spend less and earn more on that path in order to have this privilege. So again, some people are able to free themselves mentally from that constraint and they are able to live this barista-fi lifestyle out there. Just most people can't do that.

It's just not wired that way. I'm not wired that way. Katie, it has been so great talking to you today. Where can people pre-order rich girl nation rewriting the rules of wealth for a new generation? When does it come out? and they pre-order it. Well, thank you so much for asking. It comes out on June 10th, and you can find it at Money withkatea.com slash rich girl nation. And if you like podcasts or you, you know, like anything that you heard today, you can also find me on the Money with Katie show every Wednesday. I also have a

newsletter with Morning Brew that we send every Wednesday where I send some of my longer form writing. But yes, I really appreciate you guys having me back. And it was a pleasure to to be back in bigger pockets nation. Great. Katie, thank you so much for your time today. And we will talk to you soon. All right.

That was Money with Katie. Mindy, what did you think? I thought that was a fascinating conversation. She had so many little snippets that were so great. She talked about the formula for spending as your income increases. I really like that one. And she talked about a,

a dollar say how she discovered a dollar saved today isn't equal to a dollar spent today. And like how that just completely changed her mindset. And you really, you know, I think there's there's a turning point in everybody's five journey. They hear a thing. They read a blog post. They, you know, they hear a one little snippet. They're like, I get it now. And I just, I love that she shared that with us.

The dollar thing really was really speaking to me. Scott, what do you think of the show? I think Katie is a master in her subject matter expertise with all this. She's a master of all things personal finance and FI related, of course. But specifically, she just brings an extra level, an extra gear to discussion of the specific roadblocks that women face as they approach FI. And you know, you take a lot of those things for granted, right? Or at least I do as a man in this. Like for one example that came to mind during the episode I was thinking about is I was house hacking in an up and coming neighborhood when I was 23. And this was no issue for me, right? I'm a large single guy and I can bike at 9 p.m. at night back from rugby practice or whatever back to this through this kind of, you know, dangerous neighborhood, basically in there and build wealth that way.

And that may be a harder, yet another one of those obstacles, a silent obstacles that are in the way for a lot of women. And I just love the fact that so many people are now starting to do work like Katie to shine a light on these things and begin to change those trajectories. I would hypothesize, I'd imagine they are starting to change. There's a ton of work left to do here. But I would imagine that the gender pay gap is declining fairly steadily over time. And that wealth and equality between genders is declining and there is more awareness of these issues. But there's a long way to go. You know, that highlights something that she said earlier in the episode.

she said, the right people put the right information in front of me at the right time. And I think that that is, Katie is one of the right people. She's, you know, I truly believe there's a personal finance voice out there for every single person. And if it's not, you know, if it's not us, if it's not Mrs. Fuglewoods, if it's not the manfiantist, maybe it's money with Katie. It's just, she's got so much information. She's, I would say she's 100% self-taught.

She didn't go to school for this. And I think that's even more important when someone is self-taught. It's the information just seems more genuine. They're like, I had to go and find this information. I did it on purpose. I found it on purpose. And I wanted to bring that back. And now she's so excited.

She wants to share it with everybody. And she has such an easy, easy to understand way of sharing her information. So yeah, it's always fun to talk to Katie. Scott, should get out of here? Let's do it. That wraps up. This episode of the Bigger Pockets Money podcast. He is Scott Trench.

I am Indy Jensen saying adieu, Lou. My French accent isn't so great.