BiggerPockets Money Podcast

BiggerPockets Money Podcast 119: Coronavirus: Is It Time to Give Up on Financial Independence?

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In this week’s episode, Scott and Mindy bring back four previous guests (and introduce a brand new—and future—guest) to talk about retirement, the stock market, and how this current environment is affecting their spending, saving, and investing.

Andy Hill last joined us for episode 34—and boy has his life changed! He left formal employment in January and shares some surprising info about his income and investing prospects.

Amy and Tim discuss their housesitting and travel hacking plans, and how they are on hold during this unprecedented travel lockdown.

Kristy and Bryce share how their cash cushion and yield shield strategy is working out (spoiler: just fine!), and how they are taking advantage of lower rates on Airbnb rentals to offset their now-postponed geographic arbitrage plans.

The Mad Fientist is continuing to stay the course—but with a surprise revelation that he was a bit freaked out for a moment, too!

And we introduce Doug Nordman from The Military Guide, whose voice of reason and experience and offer encouragement during these crazy times.

These five experienced retirees are here to reinforce the fact that financial independence IS worth pursuing, it DOES work, and the math IS accurate!

So, nope. It’s not even close to time to give up on it!

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

Mindy:
This is the BiggerPockets Money podcast show number 119, where we are bringing back four previous guests, Andy Hill from Marriage, Kids and Money, Amy and Tim from GoWithLess, the mad scientist, and Kristy Shen and Bryce Leung from Millennial Revolution. We’re also throwing in a new and future guest, Doug Nordman from the Military Guide. Why are we having all these people on the show? Because they are all retired from traditional employment and are all going to share how this market is affecting them and shaping their future spending, saving, and investing.

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Amy:
So I think financial independence right now is more important than ever. So I asked our audience how are they feeling and anyone who’s already financially independent, we have people who just pulled the plug on their careers within the past one or three months. That’s huge. And they’re more excited than ever. And I think it’s a very worthy path because even just the pursuit of financial independence gives you options. You don’t have to be at the “end goal” to have reaped the rewards, even if you are halfway there, you would still have so many more options than you would have if you are at 0% of the way there.

Mindy:
Hello. Hello, hello, and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me as always is my go with the flow champion cohost Scott Trench.

Scott:
All right, well thank you, Mindy, that was very nice from my stay the course cohost Mindy Jensen.

Mindy:
Today, you're going with the flow. Scott and I are here to make financial independence less scary, less just for somebody else and show you that by staying on the proven path, you could put yourself on the road to early financial freedom and get money out of the way so that you can lead your best life no matter what the circumstances are in the outside financial world.

Scott:
That's right. Whether you want to retire early and travel the world, rest in quarantine or go on to make big time investments in assets like real estate or start your own business, we'll help you put yourself in position capable of launching yourself towards your dreams.

Mindy:
Scott, I am so excited for today’s episode. First of all, we get to talk with five super awesome people, but we also get to hear if people think that the F.I.R.E. Movement is dead.

Scott:
Yeah, that's right. There's a lot of things going around that are amusing, I don't know, about how the F.I.R.E. Movement is going to really come out in a really bad shape after all of this. And it's just unbelievable to me, because after you hear from these five people, everyone's just like, "No, this is the whole point of what we plan for." You don't retire if you're afraid that a recession or similar event to the situation that we're in right now can completely derail my financial plan. That's why we save for years and years, and years, and build a rock solid financial fortress to sustain early financial retirement through good times and bad.

Mindy:
Ah, yes. Good times and bad. And we are certainly in not a good time right now, and we are recording this on Thursday before the show airs on Monday. So what is today? Thursday, April 2nd. During the course of this episode I ask questions, and I thought I was going to know the answers to them, some answers were rather surprising. Andy Hill, who was the first up really gave me some of the most surprising answers, but they’re surprising in a good way. It’s not, well I shouldn’t spoil anything, but all of his answers were very interesting and very well thought out. The order of the guests are Andy Hill. Then we’ve got Amy and Tim, The Mad Scientist who shares some I thought surprising insight into his thought process for putting money into the stock market. Christie and Bryce are here, through there now second recession and Doug Nordman rounds them out. Doug Nordman is from the military guide. He’s the only guest who has not been on our show before. He is a wealth of information. He’ll be on the show in a couple of months, and I’m just super excited to share these stories with everybody. It’s not an hour each. This isn’t a five hour episode. We’ve got about 15 or 20 minutes with each guest and I think that it’s a very reassuring episode.

Scott:
And then I’ll just throw in, if you’re listening on YouTube, if you go on the notes, you’ll be able to see where each of these interviews begins. If you want to skip to or navigate through this episode, but we encourage you, if you’re listening anywhere else, just listen all the way through. They’re all good.

Mindy:
I encourage you to listen all the way through even on YouTube, but yes. Shall we bring in the first guest? Andy Hill from Marriage, Kids and Money, last joined us on episode 34 titled The Low Stress, Surprisingly Simple Way to Pursue Financial Freedom with Andy Hill and he’s back today to talk about financial freedom. Andy, welcome to the show, you’re the first of five guests that we’re interviewing today from various points in their retirement journey to talk about how the market is affecting them, and if in fact F.I.R.E. is dead. What has changed with you since we last spoke?

Andy:
Wow. Yeah. We spoke probably about a year and a half ago and a lot has changed. I am no longer formally employed. I am doing my own self employment thing as well as starting my own little business. So I transitioned out of my full time employment in January, just two months ago. So for all that’s happening right now, it’s been quite a wild ride.

Mindy:
But you purposely left employment, you didn’t lose your job due to the current pandemic facing the world. Okay.

Andy:
That is correct, yeah.

Mindy:
How are you feeling about your decision? I know people are listening to like, “January, what?”

Andy:
Yeah, no, my decision, I feel very comfortable with it. Honestly, it’s been two months of me figuring out how to be an entrepreneur. That’s been the roll of the dice there. But then March came along and I’m like, “All right, I got my groove here, I figured this out. I’ve got this whole entrepreneur thing down,” and then coronavirus. So if anything, I guess I could have prepared myself for a global pandemic. But outside of that, my business is going fine. I don’t really have a desire to go to full time employment, and I’m really enjoying crafting this lifestyle that my wife and I have designed. It’s great.

Scott:
Did you let us know what your financial position was that you essentially, you decided you were ready to leave your job?

Andy:
Yeah, absolutely. So at a point in maybe November of last year, my wife and I looked at each other and she said, “You’ve been planning this whole financial independence plan. You want to wait until you vested at your company, why don’t you just take the leap now and go for it?” I’m like, “Well, I want to wait until I’m seven years vested at my company because I get all of these shares and it’s going to pay a lot of money out and it’s going to be great. My company is doing really well, so I’m going to wait it out,” and she, “Just go for it.” So we had already saved up about 12 months of expenses at that point, which we were going to use to buy our first rental property. We were hoping to buy our first rental property in cash. That was our plan are going to save up a bunch of money and then buy our first rental property in cash.

Andy:
After we did a lot of investigation and planning through it, we decided that we're young parents right now and I do not think that we want to add the stress of owning the home and being a landlord. That's just not something we wanted to do. The more we researched, we learned that it requires a lot of work and it's a job, it's something you got to do well. So we just decided to not do that and instead use that 12 months of expenses as a runway for me to start my own small business, or one that I had already started as a side hustle, but to move into a small business. So that is the leap that we made in January. But as far as our financial position at that point, we were completely debt free, we had paid off our mortgage in its entirety, and we had 12 months of expenses set aside and we were pushing the balance of being millionaires, just maybe $100,000 off at that point in January.

Scott:
And most of that wealth is in your home equity and stock investments?

Andy:
Yeah, about a half and half. Yeah, Scott, so we had maybe 450 in home value and then the rest was retirement, and other assets of the like for investments.

Mindy:
So what area of the world are you in?

Andy:
We are in Southeastern Michigan, so the Detroit Metro area.

Mindy:
Okay. And you considered yourself in a good financial position, having 12 months of expenses and a paid off house. What are your monthly expenses look like? I’m thinking utilities, and food, and various little sundry things, but I’m not thinking there’s a huge outlay of cash from you every month.

Andy:
No, not really. My wife and I like to have some fun, we like to go on vacations and plan things like that. We’ve got two little kids, we want to set them up with summer camps because we’re both doing work that we love now. So some of those things are expensive, but we probably spend maybe 60,000 a year, something like that. 60, 70,000 a year. So not too bad. 5,000 about, $5,000 a month.

Mindy:
Okay. And now that you don’t have a job, does your wife work?

Andy:
She does, yes. So we’re both trying to ride this 30 hour work week deal, which is great. So got a job as an administrative assistant at her old advertising agency. She was very excited to go back to work. She was a stay at home mom for five or six years and was just ready to talk to humans and not have kids-

Mindy:
Adult humans.

Andy:
Yes, adult humans. And not have kids hang on her leg. So she started back in the fall and she was just so happy to be able to check her email, and drink coffee, and talk to people. It was, it was great. So she’s been doing that. And then with this transition from the pandemics, she’s been working at home. Her hours have dried up a little bit because the two gentlemen that she was supporting were global travelers, and they’re not really doing that much anymore, so her hours have gone down.

Andy:
But I’m working 30, 40 hours a week on my gig and life’s pretty good right now.

Mindy:
So what is the saying, hindsight is 20/20. Two whole months into it, is there anything you would have wished you had done differently before you left your job? Do you want to talk about your old job?

Andy:
Yeah. One thing that I wish I would have done differently is just done it earlier. Honestly, I was holding out for this big prize of an ESOP, which is an employee stock ownership plan and it’s based on how the company does, and they gave us 15% of our salary each year. They just gave it us, it was a great bonus to be upgrade company. It’s a really cool thing, but it’s all based on how the company performs. And so since my former employer is in the corporate event marketing space, they’re not doing that hot right now.

Andy:
So all that time that I waited for this thing to grow, I might see my single share retirement plan or investment plan go down quite a bit. So it seems like I was waiting for something that now this global pandemic is turning it into maybe not as great of an investment. So the whole point, as we all know, is to diversify our investments and this was a very single investment. So something I was holding on to like this is the prize that I’m waiting for at the end, I really wish that I would have just pulled the trigger earlier and started this entrepreneurial life that I’m doing right now.

Scott:
Do you believe that the company is in danger of having to go through tough choices, layoffs, those types of things going forward anyways as well?

Andy:
Yeah. They’re already, from what I hear, they’re already going through that right now. The company is over a hundred years old so I know that they’re going to be very, very fine throughout this whole thing.

Andy:
But yeah, they’re going to have to make some cuts. Client work is going to be slower and with that revenue slower, and they got to cut expenses somewhere. So with that profitability’s lower. So it just makes sense. We got to do what you got to do right now as a company.

Scott:
Fair enough. Well, how are you going to respond now to this current events, if anything? Are you going to continue doing exactly what you set out to do or is there going to be any adjustments or fine tuning that you’ll make?

Andy:
I'm going to continue focusing on my business from the income side and further invest there by bringing on some freelance resources to help me grow it. This is a great time to partner up with people who are out there looking for work too. As far as our personal finances, I think that we feel really good having 12 months of expenses right now and as things start to look a little bit more clear with my wife's income, I think we're going to maybe look at utilizing some of that income to continue to invest in the downturn. We have been, and we will continue to, do dollar cost averaging as we always have been. So we're buying highs and lows but with a little bit extra cash in the bank, we were thinking this is good time to invest and continue to develop passive income sources through the stock market. So we are looking at investing more.

Mindy:
That is not surprising, it’s still surprising to me, I have to be honest, I can’t just tell lies and that, “Oh wow, I’m totally on board with that.” That is a little surprising to me just knowing the very basics of your story because we’re in a lot of the same groups, I see your comments on different posts and I see, “Oh, I just left my job,” and my first thought when Scott and I were talking about getting this particular episode together was, “We have to talk to Andy Hill. We have to bring him back because he just left his job.” Is there anything you wish you would’ve done differently? “I wish I would’ve quit sooner.” Oh, that wasn’t the answer I expected. How are you? How is this?

Andy:
Sorry to disappoint.

Mindy:
How is this shaping your investing? “I’m going in more.” You don’t have a job right now, and you do, and I say that as you don’t have traditional employment right now, but you’re still generating income.

Andy:
Yes.

Mindy:
You have a whole year’s worth of expenses. And frankly, you’re cut off from that whole travel and fun thing right now.

Andy:
Absolutely. The things we’re spending extra money on, we’re not spending extra money on right now.

Mindy:
You probably have a little bit more than a year’s worth of expenses. And you said that was in cash. That’s not in the stock market.

Andy:
Correct, that’s in cash.

Mindy:
That’s in cash. So you’re probably good. Let’s say you’re good till June of 2021. I think they’re going to figure this out. The last big pandemic was a hundred years ago, 102 years ago, and that back in the Dark Ages, it was only what-

Scott:
The Dark Ages of 1918.

Mindy:
Were you were around then Scott? They weren’t all technologically savvy back then.

Scott:
It was right around the Trench War, which is my name sake.

Andy:
Oh, there you go.

Mindy:
I don’t even think they had discovered that you have to wash your hands with soap between patients at the time. So part of that whole spread was lack of knowledge. We know a lot more than we know then, I would guess that this pandemic, and I’m not an epidemiologist, but I would guess that we’re not going to quite go that long. So I think you’re in a great financial position. I think it’s interesting that knowing what you know, knowing that you don’t currently have outside employment, you’re still going to invest in the stock market. It sounds to me like you don’t think the F.I.R.E. Movement is quite dead.

Andy:
Oh, not at all. I think if anytime to talk about the F.I.R.E. Movement, this would be a great time to start. For a lot of people, you get a great opportunity to get some great deals on stocks and index funds that you would have never been able to buy at that price before. This is the time to talk about the F.I.R.E. Movement. This is the type of talk about financial independence. And yeah, it’s easy to throw hate at something that might say, “Hey, if I retired right now and is only solely relying on my income from stocks,” then yeah, okay. I understand. Maybe that would be a difficult situation, but a lot of people in this movement have a lot of backup plans, and they have a lot of different avenues for investments and income, and rarely is that a major problem I’ve seen, at least from the people I’ve interviewed.

Scott:
Great. Yeah. I’m writing an impassionate piece about how I don’t feel like this is the end of days for that portion of the population who spends less than they earn, invest for the longterm, builds multiple income streams, creates lots of options, is not reliant on a single source of income, all that kind of stuff. So I’m with you on that one.

Andy:
Well, the opinion that it is dead is probably coming from an opinion that’s not fully informed on what the F.I.R.E. Movement is or what financial independence is. And that’s why it makes for hot headlines, and the big pieces, and the big newspapers, but anybody who fully understands what this is all about and it’s a lifestyle change, then they know that this is just part of the coaster and we’re riding it and we’re going to get some good buys right now.

Scott:
Mm-hmm (affirmative). Absolutely.

Mindy:
Like I’ve said before, I found value in the market on February 19th that it’s high. I find even more value now.

Andy:
Yeah, absolutely. Completely agree.

Mindy:
Okay. Well you mentioned a new company. Andy, where can people find out more about you?

Andy:
Absolutely. So I host a podcast and blog at marriagekidsandmoney.com, it’s all about helping young families build wealth and thrive.

Mindy:
Okay. We will link to that, both your podcast and your blog in our show notes, which can be found at biggerpockets.com/moneyshow119 or moneyshow119. Andy, thank you so much for checking in with us. I am super excited to check back in with you a little bit later in the year and see how it’s going, and see how much your stocks have rebounded and how much even more, maybe you’ve hit that $1 million mark then.

Andy:
There we go. I’d love to celebrate with you. Thank you.

Mindy:
Fingers crossed. Okay, thanks. Have a good day. We’ll talk to you soon.

Andy:
Thank you.

Mindy:
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Mindy:
Amy and Tim from GoWithLess. Welcome back to the BiggerPockets Money Podcast. We last chatted with you on episode 57 on an episode which we called Financial Freedom, House Sitting and Travel Hacking. Can you please remind our listeners when you officially retired from traditional employment and what your after retirement plans were, and how that’s all working out for you now?

Amy:
Since I’m pretty good with the dates-

Tim:
Just go for it.

Amy:
Okay. I’m going to go with this one because Tim is date challenged. I actually just had my five year anniversary of F.I.R.E. this week, I have been F.I.R.E. for five years. I left my corporate job on April the 1st and the past five years have been the most glorious days of my life. Tim left work in November of 2015, so he’s a little bit away from his five years, but we are unicorns, I think, in the space of fireF.I.R.E. in that we are drawing down. We withdraw from our investments to live. So while we have a YouTube channel, we don’t make enough money on it to make even a dent in our low spending. And we completely credit spending less in how we were able to reach this lifestyle.

Mindy:
Wow. So do you take your money out when you withdraw it from the stock market or however you do, do you do it all in one lump sum, like at the beginning of the year or is it little bit by little bit?

Tim:
Usually it's towards the end of the year. And so we try and utilize with capital gains to provide most of our living expenses or cash that we already have. So we don't really have a withdrawal plan like somebody might normally have. It's just at the end of the year we see where our cash is. We try and not pay any federal income tax, so we manipulate our withdrawal based upon what's going on with other income sources, whether that's dividends, or interest, et cetera. Then we'll withdraw a certain amount of capital gains just to maximum.

Amy:
We mention something that’s huge, in January of this year, we became official Texans because we sold our only residence, which was in Colorado. So if you don’t have any home, find a state that is cheaper to live and Texas doesn’t have state income taxes.

Tim:
Amy always accuses me of this, and so we left out a piece of the story also. So in addition to, we retired five years ago, in January of this year we sold our house to become nomads. So we didn’t talk about that. So in January we sold our house, we were planning to be full time nomads. We are currently without a house. We are a full time nomads, but our plans were to do house-sitting to keep our lodging costs incredibly low. We had over 200 and some odd nights plan this year in houses that were going to be at zero cost in terms of cash. There’s work that comes with having a house sat, but all those plans, well number one, starting out the year before all this stuff happened that’s going on right now, two of our long sits, month long sits, canceled. So we had to adjust our plans from the very get go and then when everything that’s going on right now happened, our plans are pretty much completely out of the window.

Scott:
Before we get to the specifics there, when you guys retired, were you strictly adhering to that 4% rule or were you more conservative than that?

Amy:
We were much more conservative than that. And we’re also not on the traditional arc of F.I.R.E. because we hadn’t been working toward it for years and years and years. We had a history of a lot of good habits, so we spent less than we earned, we had bought a house that was well within our means, things like that. We didn’t keep debt other than our mortgage. So we had some good practices, and what that meant is that when we really learned about the F.I.R.E. Movement, we were ready to go. So as long as we cut out a lot of spending and we did that, so we moved out of our big McMansion, we cut everything in our life, we looked at every single expense we had everywhere we spent any money, we maximized our value there. Reduced our cost of living from $115,000 to about 36 to $40,000, so we cut about six grand a month from our spending, much of it directly from our house and downsizing to a much smaller home. So our arc was a little bit different. And so when it comes to the safe withdrawal rate, when we brought our spending down, we were able to F.I.R.E. because of that, and we did take… We are much more conservative than 4%, because we were already there once we cut our spending.

Scott:
Yeah, I just use that because I always liked you guys as the example of the folks who actually do withdrawal from their stock portfolios to sustain your lifestyle. Yet, there continues to be this trend of, “I’ve met zero people ever who have retired at the 4% role without a cash buffer, without other income streams, and call it a day from there.” Everybody who has it has some other trick up their sleeve. In your case, it’s just being more conservative than the 4% rule.

Amy:
And we’re going to probably talk about this but I want to make sure this is highlighted. The reason why this works for us is because of, you talked about the buffer, so our safe withdrawal rate, we had a number of what we could spend given a 3% safe withdrawal rate and we are still under that number. So we’re spending, as I mentioned, 36, $40,000 a year. It’s significantly less than $50 and that buffer I think is the key to our peace of mind, especially when things are really rocky.

Mindy:
Okay. I want to jump in right here and say that I was fascinated by the 4% rule, and I read the whole study that William Bengen did and I’m going to link to that in the show notes for the show, and in that study he runs the numbers or whatever for 4% withdrawal, 5% withdrawal, he also does 3%, three and a half percent, and 4% is the safe withdrawal rate. It is the highest percent that you can withdraw and still have, what was it like a 96% chance of having at least as much money as you need for 30 years, and in many cases you have so much more than you even started out with after 30 years of withdrawal. At three and a half percent it was a 100% chance of having enough money for 30 years. You’re saying you’re coming in even underneath the three and a half percent, you planned at three and now you’re coming even underneath that. That is fabulous.

Tim:
And here’s the thing also, so we just tweaked our life to make some math work, we were looking to be under 50 K and so it’s just worked out that 36 K is where we’ve landed. So we still have a target of spending about $3,000 a month. This year we were hoping with our nomadic life to actually spend less, because our lodging costs were going to zero potentially.

Amy:
[inaudible 00:25:12]low.

Tim:
Or low, and now that’s… We’ll see how it works out this year and we still have lots of wiggle room with our plan. Also, we have this phenomenally lucky event that happened and that we sold our house in January. And we didn’t put the money back in the market so-

Amy:
We owned it outright.

Tim:
We owned it outright. So we didn’t feel comfortable just staking all the money in and we were waiting to see. I had this recessionary, just seemed like the recession was on the horizon to me. Forget about everything that’s going on right now, it just seemed like the market was overvalued. And we have a lot of cash from our house, so we have that. Now we have this dilemma of what do we do with all this cash as it needs to go back in the market. But when do you put it back in? that’s a great problem to have, but a problem we have.

Mindy:
Okay, so here’s the question. You have X dollars from the sale of your house. Do you put in 100% of X in one time, or are you putting in smaller amounts periodically? And if so, what percentage of X are you putting in and how frequently are you putting it in?

Amy:
We can say something now, but you should really check with us in a year. We don’t know, we don’t know.

Tim:
Our plan is to dollar cost average it back in. We just don’t know when we’re going to start that plan and what percentages are going to be. And are we going to do it monthly? Are we going to do it quarterly? Are we going to do a weekly? We don’t know. So we don’t really have a plan just yet. So I don’t know. I wish somebody could give me a crystal ball to know. Obviously that’d be [inaudible 00:26:42]. We don’t know.

Amy:
And where we’re really trying to get in our life, and this is really our core value, is spending less and spending less, but we want a great life. So we’re not looking for a life of deprivation or sacrifice at all, we want the most extraordinary life that we could possibly have while spending as little for it. Now we’re not looking to be taped, I’m a big one-

Amy:
While spending as little for it. Now we’re not looking to be… I’m a big one that believes that I should be giving more than I’m taking. So I’m not looking to be mooching off of people to get that life. But where is that fine line? It’s different for everybody. I know you guys say, personal finance is personal, and this is as well. So where is your line? And thankfully, Tim and I are really close to a similar mindset about where that spend is. But for us, it’s we’re not looking at how much we could spend. We know we can’t spend more than so much, or else we might get in trouble with our safe withdrawal rate. But we have some upper boundary and then where are we maximizing our life that we are the happiest we can be and careful with our money and thoughtful with our money, but still enjoying every single day to its potential. It turns out that it’s significantly less than even 3% of our safe withdrawal rate, and so be it. You know what? That extra buffer comes in real handy now.

Mindy:
Yeah, it does. Yeah, it does.

Amy:
Again, it lets us sleep. We haven’t slept this well. I’m not even exaggerating. This is a really stressful time for many. Maybe I’m sleeping a lot because I have anxiety and I’m just tuning out, that could be it. I didn’t sleep. I didn’t have a good night of sleep in 2019. It was, I think, just very stressful getting toward our nomadic life. I have no idea, but I’m sleeping better than I’ve slept and that seems counterintuitive, but I think that this buffer that we’ve… because we’ve been spending less, our plan works. We’ve been doing it for five years. Even now.

Tim:
We had the cake and ice cream yesterday to celebrate Amy’s five year anniversary and I think that caused me to have nightmares last night. So I did not sleep well last night. It’s cake and ice cream. It’s nothing to do with what’s going on.

Amy:
You’re sleeping better?

Tim:
I am sleeping better, yeah.

Amy:
Yeah.

Mindy:
Well, so you want to give back, but you also want to spend as little as possible? It seems like house sitting is kind of the perfect thing for you because you’re helping somebody take a vacation, or I’m assuming that it’s mostly vacations that people are having you watch their house and their pets?

Amy:
Mostly. Yeah. Basically, they can go on a business trip, they could go to a family event or a funeral, or maybe they’re taking a sabbatical to… I mean, there’s all kinds of things. Most of it’s a holiday.

Tim:
And they almost always have pets. So it’s not just an empty house, usually their pets [inaudible 00:02:13].

Amy:
Always.

Tim:
Always in our case, but some people don’t have that.

Mindy:
Yeah. And people really want their pets to be taken care of. This is a member of my family, I want somebody to take care of this pet. That is giving back. I am giving you the comfort of knowing that you can go on vacation and not worry about your animal. But now that you can’t travel, nobody else could travel either, what is your new plan?

Tim:
Well, we don’t know.

Amy:
Yeah.

Tim:
So we will see. So we assume we’re going to have to pay to be in places. Geographic arbitrage has always been a part of the plan for us, so we weren’t going to be house-sitting back-to-back-to-back-to-back. Our plan was to potentially be in places that are less expensive, maybe Southeast Asia or central America or South America and spend money to be there in addition to house sitting. So now it’s just going to be… the waiting’s probably going to be more towards being in those less expensive places. Once we can go there again, we don’t know what the timeline is going to look like for that, so it’s obviously going to… we’re going to have to stay here in the States until the borders open up. We’d maybe like to go to Canada this summer or something like that. We’ll see. But we’re just going to have to pay a premium to be here at home and rent someplace. Our assumption is once things-

Amy:
At home in the US.

Tim:
At home in the US. Once things open back up, I think travel is going to take a while to recover. So that could potentially benefit us, in that it’s going to cost less to travel because places have to bring their business back up. We don’t know, but that’s a dynamic that we could see playing out, is that maybe it’s going to be less expensive to be paying for places because people aren’t traveling now and the fact that we are is going to benefit both of us.

Amy:
I’m going to to just jump in for a second. We, at the beginning of January, January 1st, I am the booker. I booked 49 weeks out of 52. We’re totally booked for 2020. We are already booked in January of next year. We’re already booked in December of 2021. So we are both advanced planners extraordinaire. Well, now we can’t be. So all of our plans pretty much have fallen apart for the year and we don’t have any ill will about this, this is what it is. But what has really shown us is that we can survive and we can be adaptable. I think in our position period as nomads, as FIRE people, our flexibility and our adaptability are key and no more so than now, when we have no home.

Amy:
I say everyone’s forced into a game of musical chairs of staying at home, well, we lit our chair on fire and we have no home. How crazy? But it’s really tested us as nomads to know that we are resourceful. We don’t have to be planned out a year in advance to control the situation. We can do things on a dime, we can do things week to week. So now, our year plan has really turned into like a week by week plan because as everyone else will eventually go back to work, go back to having their kids at the same schools. Even if you might’ve lost your job, you’re going to probably go back to some work. Well, we don’t know where we’re going back. It’s this big mystery. So we’re just living in the moment, which is something that neither one of us has ever really done. But I think we’re really embracing it.

Scott:
Love it. What would you kind of say… I love how you guys have such a rock solid position. You’re so conservative with this, you have flexible plan, you have plans, but you’re showing yourselves how flexible you can be with this. What would your advice be to somebody who’s trying to follow in your footsteps, who is partway along the journey to FI and maybe kind of wondering how to navigate these times?

Amy:
I think financial independence right now is more important than ever. So I asked our audience how are they feeling? And anyone who’s already financially independent… We have people who just pulled the plug on their careers within the past one or three months. That’s huge. And they’re more excited than ever.

Amy:
I think that it’s a very worthy path because even just the pursuit of financial independence gives you options. You don’t have to be at the, quote unquote, end goal to have reaped the rewards. Even if you are halfway there, you would still have so many more options than you would have if you are at 0% of the way there. So it just opens you up to all these options. So I think part of it right now is that I’d recommend staying the course. So if you’re on the path, you’ve already been doing the right things. I mean, keep saving your money, keep looking for the side hustles, keep a positive attitude.

Amy:
There’s a lot of nasty press out there, very recently about this. Weed the positives about why did you get started in this to begin with. And it’s not maybe a get rich quick kind of a thing. It’s maybe for the long haul and find people who are finding the satisfaction in their FIRE life after they’ve maybe pulled the plug and did retire early. What are they doing? And thinking about, instead of just taking that journey so intensely and maybe so incredibly frugally to a point that isn’t pleasurable, maybe get some pleasure along the way so you can kind of buckle back down and get back into it and then look at what’s on the other side. I think this has really shown us, we know tomorrow isn’t promised but I think right now more than ever it’s really held up like a mirror to our face. So think about what’s on the other side and let that guide you in your decisions.

Scott:
Yeah, I love it. We’re not really afraid of the impending doom of the financial independence movement either. We think everybody who is good with their money is likely to do better not worse than the average person going through this type of situation, so couldn’t agree more.

Mindy:
This is what you planned for. You saved for a rainy day. You plan for not working anymore and you guys don’t work. It’s the same thing. You were…

Amy:
We work. We just don’t [crosstalk 00:34:48]…

Mindy:
You were already not working.

Amy:
Hold on. We work, we don’t get paid for it.

Tim:
Yeah.

Mindy:
Traditional employment. You don’t have a traditional job. You already didn’t have a traditional job. You’re just going to continue not having a traditional job. And you have built up your nest egg enough that you don’t have to worry about that. And I think that’s really the underlying message here, is the FIRE movement isn’t going anywhere.

Tim:
No. Nowhere at all. How will we understand the naysayers? I don’t understand what there is to just say about the movement that’s negative. We don’t get it. It’s just incomprehensible to us. Why would this movement be dead? I guess, just on the other side of it is, we love our life. I don’t see how it could get much better.

Amy:
I could see how it could get better. We could be outside for one.

Tim:
I think we got it. Three weeks ago, I said something on our channel. I said, we were having a tough time. So starting out our year…

Amy:
We were sick for two months.

Tim:
… We were sick for like two months. Forget about all of this stuff that’s going on now. And we were having a really tough time of things and I said something to the effect of, “I don’t see how it could get much worse,” and then all this mess happens and so…

Amy:
[crosstalk 00:00:35:47]…

Tim:
So I think I feel a lot better.

Mindy:
So this is your fault, this is your fault.

Tim:
[crosstalk 00:35:50]my fault. That’s exactly right.

Mindy:
Okay. Tim could be found at Tim with go at list… and his phone number is…

Amy:
Yes. I’m a big one about, do not like… I’m superstitious that way.

Tim:
[crosstalk 00:36:02]…

Mindy:
Don’t tempt fate because fate will be like, “Oh, hold my beer.”

Tim:
That’s right.

Mindy:
Okay. You can hear more about Amy and Tim’s house sitting plans and their travel hacking tips which will still be valid once you can travel again on episode 57. Amy, can you please tell people where they can find you online?

Amy:
We are resurrecting our blog at www.gowithless.com but for the moment, our main thing is we’re on YouTube every single week also at gowithless, no spaces.

Mindy:
We will link to that in our show notes which could be found at biggerpockets.com/moneyshow119. Amy and Tim, thank you so much for taking the time out of your not really all that busy day.

Tim:
Yeah.

Mindy:
To chat with us.

Amy:
We’re still busy. Oh, we’re still busy. It’s surprising. [crosstalk 00:36:49]…

Mindy:
Well, thank you. Thank you for taking time out of your busy day to talk with us. I really appreciate it and I appreciate your message.

Amy:
Thanks, guys.

Scott:
Yes. Thank you, guys.

Mindy:
We’ll talk to you soon.

Mindy:
Brandon from the Mad Fientist. Welcome to the BiggerPockets Money Podcast. Welcome back to the BiggerPockets Money Podcast. We have been interviewing people about the way that the market is affecting their personal finances. And I thought of you when I thought of people to check in with because you’ve been retired for a while from traditional employment. How long have you been retired?

Brandon:
I left my full time job in August of 2016.

Mindy:
So are you out of money now?

Brandon:
No. So yeah. So this is a very important thing to talk about because ironically I had created a credit card search tool for travel hacking way back in, I think, 2010 or 2011, even before I created the Mad Fientist. And it started earning money after I left my job, which I wish it had earned money before I left my job and then I could have left my job sooner but… So it started earning money after I left my full-time job, so I’m still earning money. So that’s very important for when we talk about how I’m handling the downturn because I’m going to be doing things that maybe normal retired people aren’t and I’m probably more similar to somebody who’s employed or an entrepreneur than actual someone who’s retired.

Mindy:
Okay. I think it’s important to make that distinction for the internet retirement police. Just to placate them as well, you are married to somebody who has a job.

Brandon:
Yes. Yes, that’s true, too. So yeah, we have income coming in both ways. So yeah, I’m definitely more than just a normal working stiff and retired guy, I think.

Mindy:
But you work on your own terms.

Brandon:
Yeah. Actually, I don’t do much work, but I did all the work back in 2011 and it’s only now paying off. It was like front-loaded work.

Scott:
Yeah. You’re a retired business owner with a recession-proof business.

Brandon:
Yeah. Well, you know what, the income in that is going way down for the first time ever-

Scott:
Oh, okay.

Brandon:
… which you would think that that would be recession proof. But that’s the thing about recessions, especially really scary ones like this, it’s like everything gets hit. Things that you don’t think would get hit are getting hit. We were just on a Zoom chat with some friends last night and he works for a company that distributes people to like retirement places and care homes and things. So he staffs those sorts of care homes and you would think that would be a booming business right now. But that has also dropped off, which is really surprising. That’s the thing about like really big recession is that you don’t appreciate until you live through a couple. It’s like everything gets hit and all your backup plans maybe aren’t that great of a backup plan after all.

Mindy:
I think the toilet paper company is hiring.

Brandon:
That’s true. I wouldn’t have expected that to be moving right now but it is.

Mindy:
It is ridiculous. Okay. So how prepared did you feel before the beginning of March? And we should clarify, you are over in the UK. Did this whole corona thing hit you much sooner?

Brandon:
Yeah, I would say so. Yeah. We were taking it a lot more seriously, I think, than the States. Obviously, I talked to all my family and friends back home. Yeah, here we were pretty locked down before you guys were even really realizing that it was going to be coming at you.

Brandon:
I think it was the day that Tom Hanks got it, where it felt like that you guys were like, “Whoa, this is actually a big deal.” And I think the NBA canceled all their games. By that point, I think we were already pretty locked down. My in-laws have been self-isolating for over three weeks now, I think. And the official lockdown didn’t happen until a week and a half ago. But yeah, things here, I think, have been pretty locked down earlier than you guys.

Scott:
How prepared did you feel about your position once you realized, hey, something’s up here?

Brandon:
Yeah. I felt actually really quite prepared. Something I learned about myself is that I can never sell any stocks. My brother-in-law is a biologist and when it was still in Wuhan we were talking about it and he’s like, “Oh, this is going to be out of control. It’s already too big to contain.” I was like, “Man, what should I do with the…” Because up until a couple of years ago, I was a hundred percent stocks, and I’ve since switched over to 90% stocks, 10% bonds. But that’s not that much to cushion a big blow like what’s come from a big pandemic.

Brandon:
So we talked about this way before February 19th’s highs. Like this was earlier in February and the market was still going up. I was like, “Man, what should I do about this?” I was like, “Well, I can never sell because getting back in is the hardest thing in the world.”

Brandon:
When I was younger, I remember selling for some reason and then it’s so hard to figure out when to get back in because every drop feels like it’s going to keep going forever. And every rebound feels like, oh, this is just a temporary thing. It’s still going to go lower. It’s really hard to get back in. So I knew I could never sell. At that point I was at 90% stocks, 10% bonds, but my withdrawal rates to live off of was already well below 3.5% to cover all of our spending. And my wife was still working and the card tool was still bringing in money. So I felt good staying in 90% stocks, 10% bonds. But it’s still been even more freaky than I expected because that 30% drop was real fast and even though I was invested during 2008, obviously I have more money now, so it’s a bit harder to deal with when the 30% of something is… that thing is a lot bigger than it was back in 2008 so.

Mindy:
How is this going to shape your future spending and savings and investing, but really spending? You still have income, and your wife is still working, but like is her job at all in jeopardy?

Brandon:
Oh, yeah. She’s been off for weeks now. The UK government’s supposedly going to be paying 80% of everyone’s salaries while this is going on, while the official lockdown’s happening, whether she’ll get that or not, I’m not sure. But it hasn’t changed. Obviously, we’re spending a lot less since we’re not allowed to leave. But besides that, it hasn’t changed my plans or anything because as my income was going up, it was tempting to be like, “Oh, we can spend more because we have… The portfolio could cover our normal spending easily. If not, maybe 10 grand a month, 10 grand a year more potentially. You’re also earning income. I’m earning income that I didn’t expect. So we could potentially spend a lot more.”

Brandon:
But thankfully we didn’t inflate our lifestyles at all probably because I’m like really naturally frugal and every dollar has to still like definitely get a lot of value for me, so I can’t just waste money. We talked about it. We’re like, do you want to spend more on certain things? And we’re like, no, actually we’re pretty happy where we are. We’ve actually downsized. We just moved into a one-bedroom apartment because we had a two-bedroom one and we were like, “Well, we barely use that second bedroom.” So we’ve actually lowered our expenses.

Brandon:
But anyway, so all of this is to say that when this all hit, we were already actually really below what we could spend and now that the portfolio has decreased and both of our incomes have dropped, we’re still easily able to cover that amount of spending and we see no reason to increase it. It’s definitely going to be decreased for the next couple of months, like I said, because we’re not able to leave the house. So like half of our budget is discretionary spending, which is like travel and restaurants and bars and things like that. Obviously, that’s going to decrease, but when we’re allowed to go out again, we’ll just pick right back up where we left off, I think.

Scott:
But you know, if you spend all that you earn, or very close to it, this is going to force your hand as an individual. But for the three of us, since we spend so much less than we earn and live so far within our means, that could have been any change to spending our lifestyle, right. A lifestyle change is going to be that which the government imposes on self-isolation and nothing else. Right?

Brandon:
Exactly. Like I feel lucky that we’ve able to been able to dial in the spending so nicely. Like when I was saving for financial independence, I deprived us. Like I hit that lower limit of my spending because we were just miserable. I didn’t realize it until my wife pointed it out. Like, “What are we doing?” We were miserable anyway. So I know where the lower bound for spending is.

Brandon:
Then when we hit financial independence, I worked for another two years after we hit FI, but before I quit my job. So during those two years, we tested the upper bounds, which wasn’t actually that much more because like I said, I can’t waste money and like I’m perfectly happy with a 3,000 pound car that runs really nicely and things like that. So we tested the upper bounds of our spending, and so now like I don’t feel like I’m depriving myself, but I also feel like we have everything we want and it just happens to be not a lot of spending, which is nice. It’s hard for non-naturally frugal people to do that unless they try it out, I think and sort of find those limits, I guess.

Mindy:
So what is your opinion of the 4% rule? I’m starting to see articles online. Oh, the FIRE movement is dead and the 4% rule doesn’t account for… What is that phrase, Scott? You and I were just talking about this-

Scott:
Sequence of returns risk.

Mindy:
The sequence of returns risk. The 4% rule doesn’t account for this. Somebody who has been retired for three and a half years, you have been drawing down on your-

Brandon:
No.

Mindy:
You have not been drawing down? Okay.

Brandon:
I haven’t. So I can’t talk about it from a experience point of view, but I have done a lot of research into it and I’ve talked to like Michael Kitces who’s one of the internet’s, and the world’s most respected people when it comes to this sort of thing. And when we chatted, he said that 3.5% is pretty much the floor. Anything more than that’s like just being conservative for conservative’s sake, not really for any sort of usefulness.

Brandon:
So 3.5% has always been my like lower limit for withdrawal rates. The 4% rule takes into account these periods. Like the market is not-

Scott:
Yes. Yes, that’s the thing.

Brandon:
… [crosstalk 00:47:42]going up all the time.

Scott:
Sorry. I’m just seeing stuff that’s frustrating me where people are like this 4% rule doesn’t take into account sequence of returns risk. No, no. This is an obvious problem that anybody would be worried about if they retired right before a recession, that the 4% rule literally is designed to take it head on. Sorry. I got a little rant going.

Brandon:
That’s it. Yeah. It’s the worst case scenario. It takes into account all the previous crashes. I know this one feels different because it always feels different, but back in 2008, it felt like the whole world was collapsing and it’s just as scary. I wasn’t investing during Black Monday, but I probably imagine that was feeling like the world was ending as well.

Brandon:
So the 4% rule takes into account all of this. So yeah, if you retired on February 19th and were like, “Oh, this is going to be great,” then you’re going to have to tighten your belt a little bit for the first few years until things recover. But that’s why you have a cash buffer and that’s why you have bonds so that you don’t hopefully have to sell stocks when they’re depressed. And hopefully this recovery, when it comes, which it will because hopefully… Oh, go ahead.

Mindy:
The cash buffer, in terms of annual spending, what does the Mad Fientist recommend having as a cash buffer? And what is your definition of a cash buffer?

Brandon:
Sure. Yeah. Like I said, I was not expecting this income to come in. So I already had had a cash buffer when I left my job. I had probably two years of spending that I had in cash when I left my work. So I didn’t expect to have income coming in after that. So instead of going through my cash buffer, it grew and I ended up being probably five, six years’ worth of spending in cash, which I wasn’t happy with, but I wasn’t able to invest it because… and this is a good lesson, this is why I try to automate as much of my investing as possible because my brain still gets in the way and I still try to time the market and still think I know better, which I know I don’t, but I just can’t help myself.

Brandon:
So I ended up accumulating probably five or six years of cash. Then that’s what prompted me to start getting into bonds. Because up until that point, I was happy with a hundred percent cash portfolio, and I mean a hundred percent stock portfolio, sorry. It was only when I started getting like more and more cash that I was like, “All right, I need to just invest in bonds or at least,” so I was like, “All right, I’ll get up to 10% bonds.”

Brandon:
At the time, when I was investing in those, like I thought that they had nowhere to go but down because interest rates were already lower than they’ve ever been in my lifetime. And I was like, “All right, surely the interest rates are going to go up, which means the price of the bonds are going to go down. So this is likely a very stupid investment.” But I was like, “I just have to get out of cash” because that was way too much cash in my opinion, was like six years’ worth.

Brandon:
So I ended up going into bonds and then they’ve actually done really well, which just proves that I have no idea what I’m doing when I’m predicting where the market’s going to go. I’m glad I did because now I have those to then use to buy more stocks, which is what I plan to do if it continues to go down further.

Mindy:
Okay. One little investing tip, I guess I should say, this is Brandon’s idea, not advice on what you should do, but let’s say you have X dollars. Are you putting all X dollars, dumping it into the market all at once? Or are you dollar cost averaging every week or every two weeks or every day?

Brandon:
So this is something that I thought I learned from the 2008 crash, but I didn’t. You always think you’re going to act a certain way when this stuff happens and then you don’t, because it’s always different than you imagine it and it’s… This is another one of those situations. Back in 2008, we had just sold our house in Scotland in 2007 and we sold it for 50% more than we bought it for two and a half years earlier, which we did a live-in flip, but we didn’t realize that’s what it was called at the time.

Brandon:
So we invested half of the money in Scotland and then we took half to America. The money we invested in Scotland got cut in half pretty much instantly because 2008 happened, and that was a good lesson for my first big chunk of money. So then the American half, I was like, all right, I want to invest this, but I don’t want to put it all in at once because I got burned with that other batch. So I put in a big chunk and then the market went down a little bit more. So I put in a little less because I had less to invest, and then it went down a whole lot again. Then I just started trickling money in.

Brandon:
So then by the time the market bottoms in March of 2009, I was only investing 150 bucks at a time, not because I didn’t have the money, but because I was like, “Oh, it’s going to keep going down. So why put a few thousand in when I could just put a few hundred in and then I’ll get it lower?”

Brandon:
Anyway, long story short, that was the bottom. And I ended up having a fairly sizable chunk of cash that I didn’t even invest in what the lowest stocks may ever be in my entire life, and it was because I was trying to time the bottom. So I thought, “All right, next time that happens, I’ll be better at this. I’ll actually increase my investing as the market drops so that I’m putting more money in cheaper and I’ll make sure not to put little tiny amounts in because I want to get this money invested.”

Brandon:
This all started happening and I’m like, “All right, great.” The markets were down, I don’t know, 5% and I start putting some money in. And then I started doing the same thing that I did back in 2008 I’m like, “Oh, it’s going to go down way more from here. Surely this is…” So then I was like, “Well, I need to have a plan that I stick to.” So I just put together a spreadsheet, which is what I do for everything. By that point, it was like down 12 and a half percent or something. So I just put the price for VTI, which is the total international stock market ETF that I was investing in, and then VXUS, which is the total international stock market ETF that I was investing in. So I would just put the…

Brandon:
… the total international stock market ETF that I was investing in. So I just put the prices that was the February 19th, and then I just mapped it out all the way down to 50% down. And now I have these price targets that I can buy and I also cut up all the cash that I wanted to invest, and I allocated that to each of those price targets. So now I know when to invest and how much to invest. And I can actually just put in limit orders in Vanguard to just then automatically buy them, so that I keep my brain out of it.

Brandon:
Because even though I have that plan in place, I still screwed myself up because one day I hit two targets in one day. So I had to manually try to put money in on that second target because the markets were tanking 10%. And I couldn’t do it because my brain was like, “Oh no, it’s going to go down more. So just wait.” And it’s been up ever since. My one target I missed because I was stupid, and let my brain influence me. And now the markets went up again whatever 20%, and now it’s back down again. But anyway, long story short, like I can’t trust myself to do the right thing, so I have to make a plan and then automate as much as possible.

Scott:
I think it's a really interesting approach. I haven't heard that before someone setting up targets like that. So I think that's fascinating. And think a lot of people benefit from it. What advice do you have… Moving, changing topics here. What advice do you have for folks that are on the journey to FI? Who are maybe let's call it earning an upper-middle-class income 75, $85,000 a year, couple hundred thousand dollars in net worth. Not there yet. Experiencing a massive road bump here. What's your advice to that person?

Brandon:
Well, first I would say realize how valuable that stash that you’ve accumulated is, and how that makes you feel so much more secure because this is really uncertain times. Every job’s at risk, every business is at risk. But if you have five years of expenses, 10 years of expenses, even one year of expenses saved up that you could survive off of. That’s no doubt going to put you in a much more relaxed position than a lot of the people out there right now. So appreciate that.

Scott:
Even if that’s in stocks?

Brandon:
Yeah, yeah, yeah, exactly. You could still sell stocks straight away. They might not be worth as much, but you can still sell them stay. So realize that. The second thing I would say is think about how you feel during this time because this is when you learn how to become a good investor, and you know what’s going to trip you up in the future. This is when you learn all the things that you need to fix for the next time this happens cause it’ll happen again. That’s just the nature of investing in the markets. So you may want to start a diary. Luckily I have a blog and I have a post coming out next week about all the things that I’ve learned during this crash that I’m going to change my investing plan. So it’s like a diary, but if you don’t have a blog or anything and then just write it down because going through it as much different than thinking about going through it. So you’re going to want to think about your asset allocation.

Brandon:
You may have been fine with a hundred percent stocks on February 19th because you felt like a genius because you’d been earning money for eight years and just going straight up. But now if you’re freaking out then maybe you need to rebalance, and these are things that you want to do after the dust has settled because you don’t want to act impulsively when the fear is high. But make notes of these things and really just start thinking about how you’re going to invest in the future, so that the next one of these crashes isn’t as dramatic for you.

Mindy:
That’s really great advice. And Brandon, when that comes out, please send me a link to that so I can link to it in the show notes for this show as well. The show notes for this show can be found at biggerpockets.com/moneyshow119, moneyshow119. Brandon, thank you so much for your time. I really, really appreciate you coming on and sharing this. You think that Michael Kitces is brilliant and you’re right. He is. But there’s a lot of people who think you’re brilliant as well and hearing you say, “Wow, I still freaked out even though I know I have this plan.” It just brings it home. Like, “Hey, it’s okay to be freaking out. This is a natural thing. Now I need to look to Brandon’s advice as well and say, ‘Ooh, I need to not sell. I need to not freak out. And gut react, and panic.'” So I think it’s really helpful. And thank you so much. Can you remind people where they can find you online?

Brandon:
Sure. madfientist.com and then madfientist on all the social things. It’s a made up word, so I got all the accounts that I needed, so it’s just madfientist everywhere.

Mindy:
That’s awesome. Okay, Brandon, thank you so much. We will link to Brandon’s contact information as well in the show notes if you wanted to hit him up. He is pretty active on Twitter if you tag him.

Brandon:
Yeah, that’s right.

Mindy:
And if you share with him your favorite beer.

Brandon:
That’s true.

Mindy:
Tag him in your beer pics. Okay, Brandon, thank you so much for your time today. We’ll talk to you soon.

Brandon:
Thanks for having me. See you guys. Great talking to you.

Scott:
All right, hope you’re enjoying the show. We’ll be right back after a word from today’s show sponsor.

Mindy:
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Mindy:
Kristy and Bryce from Millennial Revolution. Welcome to the BiggerPockets Money Podcast.

Bryce:
Hi.

Mindy:
I’m sorry, welcome back to the bigger pockets of money podcast.

Bryce:
Right, yeah.

Mindy:
Kristy and Bryce last joined us on episode 55, and then again the next day on episode 55 and a half to talk about their cash cushion and their yield shield. And now we’re going to talk today about how this market is affecting you. And first off, remind people, when did you retire?

Kristy:
So we retired in June of 2015, so it’s been almost five years.

Mindy:
Okay. But that was from formal employment, and now you have, you still have income coming in from different revenue streams, is that correct?

Kristy:
Yeah, inadvertently. So we didn’t actually start the blog until almost a year after we retired. So that just came out of a passion project. But yes, there’s a unexpected income after retirement.

Bryce:
We don’t use any of it. It’s important for us to retire and only live off of the original amount that we retired with. The side hustle income, we’re just saving for a rainy day and-

Kristy:
It’s mostly for business and a separate [crosstalk 01:01:36].

Bryce:
And use it for business expenses and this kind of stuff. We want to keep our experiment pure. Because one of the criticism is all these finance bloggers are just retiring off of their blog. We’re not actually living off of any of the money on our blog.

Scott:
That means that you’re completely out of money at this point. And your plan that you constructed completely imploded at the first dip, which we’re experiencing right now.

Bryce:
Not at all.

Kristy:
That’s what the haters would like to think.

Bryce:
So the last time we talked about it, we talked about our strategy for how to segregate the cash to make sure that when tiny times are going great, everyone’s happy, but when times turn bad, you don’t want to sell in the middle of a downturn. So what, Mindy, alluded to the cash cushion. Part of that is at the beginning of the year, we’ve refilled all of the buckets of this year’s expenses plus cushion for the next three years of expenses. Just in case there is a prolonged market downturn. Kristy is really one of the most pessimistic people in the FIRE space. So she always assumes-

Kristy:
We’re all going to die.

Bryce:
Everything’s going to blow the hell up at any moment. So that’s why we did that. And boy am I glad that we do that because people are in a state of panic right now. As you might’ve noticed because all businesses are shut down, stock market is tanking and even real estate investors might be getting squeezed with what’s going on with this men’s strike thing. But we’re not feeling scared at all because this year our entire living expenses is just sitting in a savings account and the next-

Kristy:
Which we accumulated the previous year from dividends and interest.

Bryce:
And the cash cushion was refilled when times were good, which is last year when stock market was up like 30%. So we are good for four straight years of downturn level. The wait for this thing to go up is because when we started investing, that was during 2008. So I remember how acutely fearful it is trying to be a stock market investor during times like this it’s not fun. So you want to make sure that all of your ducks in a row before it happens.

Scott:
So do you feel that the people who are saying that the end of the FIRE movement is nigh are being obtuse?

Kristy:
I think what’s going to happen is I think as a result of this bear market we’re going to be able to see who is actually a FIRE person and who’s a wannabe FIRE person. So we’re going to separate the wheat from the chaff and see who actually knows what they’re doing.

Bryce:
Because people think, “Well, FIRE is just put money into index fund and then that’s it.” There is a little bit more complexity to it, not a whole lot more complexity to it. And everyone has their own system for how to mitigate the risk of a sequence of return risk. We have our system that we wrote about in our book Quit Like a Millionaire, and as well as we talk about in our blog and we talk about in the previous podcast. Other people have their own ways of doing that, but those are the people who actually are going to make it through this. The people who are panic selling right now, this is really an acid test of who can actually make it through FIRE. Because FIRE has become so picked up by mainstream media, a lot of people want to do it. Well, here is where you have to put on your big boy pants, and actually do the things talked about. You need to be able to have the intestinal fortitude to at least not hit sell all, but potentially if you’re still working by into the market dip.

Scott:
Well, it just sounds to me like you prepared for exactly the present circumstances with your financial portfolio… You didn’t plan on the markets being really, really, really good forever. You planned your retirement around the worst case scenario, which is the point of FIRE really.

Kristy:
So one of the things that we did was not inflate our cost. So in the last five years we never spent more than $40,000. Because I knew that relying on blog income makes no sense. Thinking that the bull market going to be around forever doesn’t make sense. We’ve been through 2008 we know that it could happen again. So as a result, the money that we accumulated and use to actually replenish our cash cushion, now we’re just sitting and relaxing while some people are panicking because they didn’t actually think this would happen. They thought that the stock market would rally forever.

Bryce:
It’s really important to maintain that 4% spending when you retire because it’s really tempting when your stock portfolio is up like a hundred grand to be like, “Hey, how many Tesla’s do I buy this year?” But if you do that the reason why you need to do that is you need every penny of the gains to withstand the drop. And because we didn’t do that, we are still actually, I think last I checked, we were still above a million even after all this market downturn because our starting point was so much higher because the gains, we actually let compound and compound over the past 10 years. And another thing that I wasn’t expecting is that in a recession, cost of living drop.

Kristy:
Yep. So one of the things that we had to do, this is actually because of a family emergency. We’re actually back in Toronto, we were planning to actually just ride out the pandemic in Southeast Asia because we were in Bali at the time. So what’s happened now is that there’s so many airports that are closed, and there’s a lot of travel restrictions in place. So then we’ve had to change our strategy to do more local geographic arbitrage rather than global geographic arbitrage. But then when I found out was that after we came back to Toronto, downtown condos in Toronto, the Airbnb is actually cheaper than rural areas, which is where I was going to go to save money because there are no travelers, there’s no business travelers coming in. There’s all these travel restrictions. So is Airbnb’s are actually emptying out. And I talked to some Airbnb hosts, they said that they had gone from 95% bookings to zero.

Kristy:
So one of the things people don’t realize is that in a recession everything gets less expensive. So you don’t need as much money for your portfolio to live on. So to give you an example, we’re actually moving to another Airbnb today, which is in downtown Toronto. Originally it rents for 110 US dollars a night. It’s actually on sale for 39 US dollars a night, I kid you not. For a two bedroom.

Mindy:
Wow.

Kristy:
Really nice fancy condo with pool and balcony.

Bryce:
If this stays like this and God, I hope it doesn’t stay like this for the rest of the year.

Kristy:
Me neither. Me neither.

Bryce:
Financially, we’re projecting our costs will actually come down from 40 to about 30-

Kristy:
36,000.

Bryce:
… 35, 36 which will make our financial stuff even safer because we had budgeted 40 we’ll be able to put money into the cash cushion. So the longer this goes on the safer our cash cushion becomes [crosstalk 00:01:07:59]. I wasn’t expecting that.

Kristy:
And one silver lining of not being able to go out because we had to self isolate for two weeks when we came back. There’s nothing for you to spend money on. Even if you wanted to spend you can’t spend money. I was looking at my spreadsheets, we spent like nothing. We spending less than 20 bucks a day.

Bryce:
Because we are in quarantine that’s why.

Kristy:
We can’t go anywhere.

Scott:
I did drop a few hundred bucks on some home workout equipment, so dumbbells and that kind of stuff.

Kristy:
We just do a lot of yoga for free.

Bryce:
And Netflix. 699, [crosstalk 00:14:31]-

Kristy:
A lot of Netflix.

Bryce:
… a lot of Netflix going on.

Scott:
[inaudible 01:08:33].

Bryce:
Yeah, yeah, yeah. Exactly.

Mindy:
I have not watched that one yet. So the 4% rule says you can draw down 4% what is your actual draw down? Have you been hitting the 4% every single year or are you going a little bit less? A little bit more.

Bryce:
So we retired $1 million and $40,000 was our draw down number. You're actually allowed to increase by the cost of inflation every year. But we just haven't been doing that just because A, my wife is a budgeting genius. And B-

Kristy:
Competitive shopping that’s the way to win.

Bryce:
And humble too.

Kristy:
Yeah, very humble.

Bryce:
So rare to have this level of genius and humbleness. Anyway. And also the fact that we’ve been traveling continuously for the last four or five years allowed us to basically sidestep inflation because you can always adjust how much your living expenses are just by spending more time in different places. Like we were just in Thailand and your cost of living drops down to like. We were just looking at out of curiosity, we were just seeing what rentals looked like in Thailand right now. And they’ve dropped to down-

Kristy:
It’s like 300 bucks a month.

Bryce:
A month that’s how much it costs right now if we had stuck it out in Thailand. So we were able to keep our costs not even just at the 40,000, but we didn’t even have to take the inflation increases. So it’s actually been getting safer, and safer, and safer.

Kristy:
It’s actually going down as a percentage, so it’s not even 4% going forward. It’s less than 4% because we haven’t been inflating it.

Scott:
It’s very interesting to hear you say this because you think that having retired on a 4% rule, and being basically traveling nomads around the world that you’re in the absolute worst position to come out of this, but you don’t see it that way at all. In fact, you’re in a completely unaltered position relative to everyone else who’s also all stuck at home, and you’re not worried at all.

Bryce:
We’re actually finding that there are advantages to be living out of our backpacks because we can move around and see where there are hotspots of panicking Airbnb hosts. You don’t lock yourself down to one location. We were telling people, our friends that are living in Toronto, like how much [crosstalk 00:16:37].

Kristy:
We’re paying for rent.

Bryce:
And it's less than how much they're paying longterm. For one year lease. They're like, that never happens. Short terms are never supposed to go for the long term, but here we are.

Mindy:
Well, I think it’s really smart on the part of the longterm or the Airbnb people to try and capture some of that to reduce your price. What would that host be getting instead of $39 if you guys didn’t rent it, they would be getting $0. And yet $39 isn’t 110 but it’s a whole lot more than zero.

Kristy:
Yeah, that’s true.

Bryce:
I can’t think of a situation in which tourism has dried up globally, all at once like this ever. I was talking to some people in New York. And 9/11 it wasn’t even like this. These are-

Kristy:
Very strange times.

Bryce:
… very strange times. And you know what, every time one of these things happen. It does feel like, “Oh, it’s different this time.” 9/11 it felt like it was different this time. 2008 felt like it was different this time. This feels like it’s different this time, but we’re all going to get through it. We’re all going to get through it if we don’t ride in the streets or whatever.

Scott:
So put yourself in the shoes of someone who is on the journey to FIRE. Maybe they’re still working a job, slowly, steadily accumulating wealth. They’re doing all the right things. They’ve got an emergency reserve, and they’re buying stocks and that kind of stuff. But they’re worried about their job income. They’re worried about their progress what’s your advice to somebody in that situation is still working along the path?

Kristy:
We actually talked to some of our friends and some of our readers that are in that exact situation. They’re one or two years from firing and I was asking them, “Are you concerned, is this going to stretch out your timeline?” And some of them have actually said it’s the opposite. Because they have money right now because they work in tech so they can actually work from home. They’re actually putting more money into the stock market, and expecting a bigger return because now they can buy as it’s going down. They actually have a huge jug of cash to deploy. Now for people who have actually lost their jobs and are not in that fortunate position of being able to work from home. I would say that definitely having cash on hand is really important. Before you think about investing in the stock market make sure that you have an emergency fund, you have at least six months of expenses covered. And figure out your job situation before you figure out the investing because you want to make sure that you have enough cash on hand, and to make sure that you have enough runway.

Bryce:
Yeah, it’s kind of like this that really show how important it is to have a financial planner because you just don’t know when this… If anything would’ve caused the recession, I would have been like something to do with Trump or Bernie Sanders. Something to do with the election, something like that. Pandemic? No way would I have ever guessed in a million years that that would’ve happened. But the panic that’s happening right now, especially in America where we’re hearing statistics half of Americans don’t have more than a couple hundred bucks saving in their checking account. And now their job is taken away for just two weeks and they’re like, “I can’t pay my rent. I don’t know what food…” It’s actually true that people are in dire straits financially. And the people that say, “Oh, FIRE’S not going to work or whatever.” These pandemics are going to happen or not these pandemics, but these recessions these global crises are going to happen whether you like it or not, or whether you’re prepared or not.

Bryce:
So would you rather be facing one of these crisis with a couple hundred bucks in your checking account, or with a couple of hundred thousand dollars of an investment portfolio? Even if FIRE gets lacked, and it’s not as easy anymore. I’d much rather be an our position than somebody who is looking at rent or food and being like, “I have to pick one.”

Scott:
Yeah, I love it. Regardless of where you are in the journey to firing. If you’ve been spending less than you’ve earned and accumulating a cash cushion and investing in stocks for even a couple of months, you’re better off than the guy who hasn’t. And so no matter where you are in the continuum, no matter what, everything becomes relative. This is not going to help you accelerate you towards your journey unless you work in tech, or one of those folks. It puts you in a relative position of strength by having good financial habits, no matter where, how far along you are.

Bryce:
Yeah. You’re still better than the vast majority of people in America and Canada who just are just pickled in debt and have no money.

Mindy:
So here’s a question. You said that you’re not living off of any of your extra income sources. You’re only living off of your investments. Are you continuing to invest? Are you putting more money into the stock market right now?

Bryce:
Yep. Yeah, yeah. It’s like a separate account in any amount that we earn that we don’t… it doesn’t go through business expenses. Hosting is actually gets surprisingly expensive, and MailChimp gets surprisingly expensive because the list grows so big. But anything that we’re not spending on [inaudible 01:15:17]business, we’re just shoveling into another portfolio that it’s another self-contained portfolio that’s just investment in the same index funds as our main one.

Mindy:
Okay, so we just spoke with the mad fientist, and now I’m going to ask you, are you putting… Let’s say you have X dollars, are you putting 100% of X dollars in the market whenever you get it, or are you putting in at a more, what is the right word? I don’t know what the right word is.

Kristy:
Consistent. Periodic.

Mindy:
Yes, periodic thank you. Look at how smart she is. You’re such a lucky man, Bryce.

Kristy:
I know.

Mindy:
A more consistent, and periodic-

Bryce:
And humble.

Mindy:
… and humble.

Bryce:
The most humble, the most humble.

Mindy:
The most humble. So do you just dump it all in all at once? Are you consistently putting in for the take advantage of the dollar cost averaging?

Bryce:
It’s more consistent. We basically doing it once every quarter. I just made that-

Kristy:
We just do a financial review, and then when we do the review, put it in.

Bryce:
yeah.

Mindy:
Oh, so did you put it in in January, or did you put it in in March?

Bryce:
January is the last time we did that, and I think we’re going to do one-

Kristy:
In April probably.

Bryce:
In April, yeah.

Mindy:
It might be a good time to put a little bit more money into the stock market. I’m not giving you advice that is just, you know.

Kristy:
When there’s locked inside and there’s no deals to be had. The stock market is the best deal.

Bryce:
Yeah. I am waiting for it to be a little bit less volatile because it’s like I have never seen Dow swings of 2000 bloody points in a day before. It went up and down like 10%. Like JL Collins is like, “I remember ’87 when it went down 20 in one day.” But I was like, “I’ve never seen that kind of volatility right now.” So I am waiting a little bit for the calm down because we’re getting weird effects where like the index ETFs are detaching from the underlying value of the index itself because there’s so much volume going one way or the other. So I’m waiting for that to speed down a little bit because I don’t want to buy it when it’s at the wrong price.

Mindy:
Well, it’s never a wrong price to buy.

Bryce:
If it’s not reflecting the underlying assets [inaudible 01:17:14].

Mindy:
Okay. That’s fair. That’s fair. Okay, great. Bryce and Kristy, can you please remind people where they can find you online?

Kristy:
Sure. So you can find us on our blog, which is www.millennial, with two N’s, -revolution.com. We have a contact us page. You can contact us via email. Also our social media is on there as well.

Bryce:
And we have a book called Quit Like a Millionaire available where all fine books are sold.

Mindy:
Or on Amazon, which is the only place that find books are sold right now.

Kristy:
The crazy thing is while we were in Singapore, just before we came back to Canada, we found our book in the biggest, which is voted the best airports in the entire world in Singapore. We found our book on the best-sellers shelf. I was like what?

Scott:
Nice. That’s awesome.

Bryce:
I was like, “Oh my God.” Because it’s like those bookstores in the airport, they only have the really most famous ones.

Kristy:
That’s my favorite airport in the entire world. [inaudible 01:18:09]I’m home.

Mindy:
Did you take a picture?

Bryce:
Yes, definitely. Yeah.

Kristy:
Yes. We did. Yeah.

Bryce:
Okay, great. And all the links to everything that we’ve talked about here on this episode can be found in our show notes, which are at biggerpockets.com/moneyshow119. So we’ll link to your book, and we’ll link to your site, and all of the ways to contact you. And apparently they’ve got nothing better to do. So hit them up.

Kristy:
Save lives, stay home and listen to the BiggerPockets Podcast and read blogs. That’s how you save [inaudible 01:18:39]

Scott:
There you go.

Mindy:
Thank you. Thank you. Okay. Bryse, and Kristy thank you so much for taking time out of your incredibly busy lives to talk to us today. But I think it’s really important for people to hear this message from people who have been doing it, not just once. I think Scott made a mistake when he said, “Oh, this is your first recession.” No, didn’t you retire? And then instantly the market’s dropped because of the oil?

Bryce:
Yeah, it was in 2015 there was… You guys didn’t feel it as much, but it was a big oil crash that happened because the Saudi Arabians were trying to dump oil onto the market. And Canada’s stock market got black as a result. So this is the second downturn, and this is the second major depression event that we’ve invested through. [crosstalk 01:19:19]So it’s going to be okay everyone.

Mindy:
From seasoned pros, you heard it here. Okay, Christie and Bryce, thank you so much. I hope your next Airbnb is amazing.

Bryce:
Thank you.

Kristy:
Thank you.

Mindy:
Rounding up this episode is Doug Nordman, who has been retired the longest. Doug, how long have you been retired?

Doug:
18 years.

Mindy:
Okay. Doug is from the-military-guide.com. If you’re not military, you could still learn a lot from Doug because he’s been retired for 18 years is positively swimming. Actually, I guess he is positively swimming because Doug is a Hawaii resident. I was going to say Hawaii native, but I don’t think you are a native to Hawaii. That’s okay. You live there now. And Doug is a surfer. Doug, have you been able to surf during this whole isolation time?

Doug:
Yes. Thank goodness. All the beach parks are closed. We don’t have any visitors here. We don’t want any visitors here. But you can still park your car on a street, take your board out of the back, cross the beach, park to the ocean and then surf. You can’t hang around and talk story with your friends, but you can surf.

Scott:
So the beach is closed not the ocean.

Doug:
Right. The beaches are closed. The oceans. Okay. Exactly.

Mindy:
Okay. So Doug, you have been retired for 18 years.

Doug:
That’s right. And it’s been 18 really good years, and I see myself being unemployable for the rest of my life here.

Mindy:
But you have been retired for 18 years, living off your retirement funds. The markets have crashed. I’m not sure if you know this clearly, you aren’t going to need to go get a job.

Doug:
I don’t see that happening. Seriously. Don’t see that happening. I’ve enjoyed being responsible for my own entertainment and taking care of my own time now for that entire time, and it’s a good life. I will point out that this is to us, 18 years-

Doug:
I will point out that this is, to us, 18 years ago was right in the middle of the internet recession, and so this is our third bear market, our third recession. And frankly, the things that led into this recession, personally, I find that far less alarming than the stuff that it was going on during 2008 and 2009, with the financial institutions almost locking up the country’s economy.

Mindy:
Okay, that’s fair. We just heard from Kristy and Bryce, who have been retired for almost five years and they retired into… They’re Canadian. They retired into a Canadian oil crisis. So as soon as they retired, their market’s dropped. So this is their second recession. They’re also not concerned. Why are you not concerned?

Doug:
It’s a lot of the same things that Kristy and Bryce feel comfortable with. We spent a week together at the Chautauqua last September, talking about these things. And the idea is, that you have control over your portfolio, you have control over your asset allocation and your expenses. And we’ve been doing that for 18 years. We’re very comfortable with our spending. And in our case, because I have a military pension, we’ve also invested the rest of our assets very aggressively, literally 95% or more, in the stock market. And because of that, over the last 18 years, our portfolio, our investments have grown faster than inflation. Much… Exactly, I see your hand going up there, and that’s exactly what’s going on.

Doug:
What that means is, when you get past the first decade of financial independence and you’re at the end of that period where you’re vulnerable to this sequence of returns, risks, and you’re vulnerable to recessions at the beginning of your financial independence, your actual portfolio withdrawal rate, started out at four percent, but it’s probably dropped to three, three and a half percent, just because your portfolio has grown so much faster than you’re spending.

Doug:
That’s exactly what’s happened with us. The researchers are still trying to put the numbers on it, but everybody has heard these anecdotes and they start seeing that in the stories with financial advisors. We’re a living proof of that. We have a portfolio that’s sustainable for the rest of our lives. I don’t want to say it’s immune to bear markets, but it’s certainly highly resistant, and we’ll come out of this pretty much the way we started with more money than we need.

Scott:
Yeah, a lot of people… I was going to say smart people. All these people are claiming, “Hey, this is the whole point. This is sequence of return risk. This is why the 4% rule in early retirement doesn’t work.” What’s your thoughts on that?

Doug:
Well, they are absolutely correct that the failures in the 4% safe withdrawal rate math, the simulations, the failures were usually when there is a bear market right at the beginning of that period. And because of that, the portfolio is blundered on for 20 or 25 years instead of for 30 years. One example of that, that’s been around for a long time now, is the Y2K retiree, who retired right at the end of 1999, and went through all these recessions. That portfolio probably will not make it till 2030 if he continues spending like a 4% safe withdrawal rate robot. And that’s the whole key, is that the simulation has a number of assumptions in it, number of modeling conveniences, that don’t resemble real life. And one of them is, that I’m not blindly raising my spending every year for inflation. I live my life, I optimize the things I enjoy doing, and our spending is actually lagged inflation.

Doug:
There’s also a phenomenon called the Retirement Spending Smile. The theory is, you start off your retirement… Mindy’s smiling already. You’ve got your spending at a certain level and then as you go through your life, as you enjoy yourself, your spending actually drops, because you’re optimizing things. Later on in life you’re not doing much of anything. You started out as a go-go retiree and then in your seventies or eighties you’re slow-go maybe even no-go, and then there’s a spike for end of life care, at the end of your life expectancy. But again, that’s not modeled in the 4% safe withdrawal rate. That’s an example of variable spending, and there are many other techniques and rules that one can use for variable spending in a recession. So all of these things that make the 4% safe withdrawal rate have failure rates in it. Well, we’re human beings and we can work around that, and we are able to do that with variable spending. I got no worries.

Mindy:
So it seems to me like you, I mean you just said, I have no worries. How prepared did you feel before the beginning of March, when this kind of all exploded in the United States, versus how prepared you feel now? Kind of sounds like you’re the same.

Doug:
Pretty much the same. And it wasn’t that we expected in December or January, oh my gosh, a fish market in Wuhan had some people get sick, here comes the bear market. No. And the other thing is that people had been talking for many years, during the bull market, about keeping some dry powder for that next bear market and start investing in that recession, and catch the bottom and really make out. And we’re not like that either. We’re just keeping our money in our asset allocation. And enjoying life. And it seemed like the market was certainly richly valued, but that happens on and off during the market cycle, and it didn’t seem to have any impending doom behind it. When the market’s richly valued, I know that many times it just goes sideways for a number of months before it starts going up again. So there was no particular concern or worry and we didn’t certainly take any money off the table, or bulk up an emergency fund, or do anything like that.

Doug:
We just enjoyed living our lives and frankly, most of our efforts these days, financial efforts, are simplifying our portfolio, taking care of our legacy and philanthropy. As an example of that, by the way, while we were visiting my daughter and my son-in-law in California, oh, they live in the same house where we were really visiting our baby daughter, granddaughter, one of the things we did during the visit, is we put money into Aria’s 529 account. She’s 10 weeks old, she’s had a 529 account for a month. And her parents were really happy to be able to start a 529 account in this bear market. They feel like they got the whole thing in a 25% off sale.

Mindy:
That is a common theme that I’m hearing from, what is it, our third episode after the big coronavirus spike in America, and that’s kind of the same thing I’m hearing is, stocks are on sale right now. I love a good sale. I’m frugal. Everybody that we’ve been talking to loves a good sale because then you’re getting the same value for a lower price. So right now stocks are on sale. If you have the means to buy, don’t be selling.

Doug:
I will point out that my spouse and I have simplified our lives and our investments and we’re not buying or selling. We’re just continuing on in our plans to spend on the things we normally spend on and the lives we normally lead. But somebody who’s on route to FI, someone who’s saving for financial independence, by all means have that plan, have that asset allocation and keep investing. Put it on autopilot, every paycheck, every month, whatever your plan is, keep investing. Don’t worry that you’re getting a 25% off sale but next week it might be 40% off. Just keep investing at whatever your regular interval is. That gets rid of the decision fatigue, you don’t have to look at the markets, you don’t have to look at your 401k statements. You can just put an autopilot and go live your life.

Mindy:
And who has the best return, Scott, was that dead people? What kind of portfolio-

Scott:
Dead people will get the best longterm returns.

Doug:
They are highly logical when they are investing.

Scott:
So, I’ve asked the same question for everyone, but imagine that you are just starting out in your journey, or you’re a couple of months, or even a couple of years in, you’re still working and accumulating and investing, and your income and your investments have both been disrupted at this point. What’s the advice for someone in that situation?

Doug:
Well, if you’re relatively certain you still have your job, if you’re still employed, you probably have already built an emergency fund, you’re probably already looking at an unemployment fund to get you through a few months if you do get laid off. If you’ve got all that stuff already taken care of, and you should as soon as you can, then going through this recession, I’d just continue with your asset allocation. Yeah. Get a plan on what your longterm goals are, make your asset allocation. Now, a recession will help you recalibrate your asset allocation, it will tell you whether you really are comfortable with that 80% equities asset allocation, maybe you want to dial it back to 70, but you’ll have asset allocation and keep following that plan, and keep investing, as regularly as you have been, as regularly as you should be, for financial independence. And as you are investing, you’re going to naturally rebalance your portfolio.

Doug:
When you’re starting to put money in there every two weeks, every month, if stocks are dropping rapidly, then you’re going to end up buying more stocks with that, just to bear and bring them back up to your asset allocation. And then for the rest of the life you lead outside of the investing part, again, you’re going to look for ways to make yourself more valuable to that employer. You’re going to look for ways to maybe consider changing a job, changing a career, if this is a good time to do that. You might even be thinking about starting a side hustle, but these are all things that you would think about normally in the course of your annual life and your progress toward becoming more valuable than your career, more skilled and experienced, and eventually financially independent. So great opportunity, right? You get the sale on stocks, you get to keep investing.

Doug:
Now, if you’re unemployed, that is a problem. You’re going to go into financial survival mode. You’re going to make sure that you have enough of an unemployment fund to get you through that period. But otherwise, if that’s the situation where you are still employed and you expect to be employed, then you’re going to just keep on investing. We went through this at the exact point in our careers in 1987, where we’d been employed for five years, and that one day gigantic retraction in the market happened, almost 20 to 5% in one day. It’s going down now. And we had some extra income from our paychecks, that we had been saving, and certificates of deposit, that we put into the stock market. And that’s taking advantage of the sale and continuing to grow our wealth. And that made a big difference in the long run, being able to put that money in there for the long term. So I’d advise people to just keep doing it, have the plan, have the asset allocation and keep investing.

Mindy:
Okay. The October of 1987 crash has been mentioned by several people in this episode so far. I don’t think that people can fully understand because when you look at the price drop, it was not nearly as significant as the price drops that we’re having now. A good way to describe it, right now the markets are down what, 25-30%, 20-30%, I don’t know the exact. We’re recording this on Thursday, before it releases on Monday, and I’m not sure exactly where the markets are right now. But imagine all of March dropping in one day.

Scott:
One day, yeah.

Mindy:
One day. That was the October of 1987 drop. And I remember that I was a sophomore in high school, and I remember looking at that and thinking, oh wow, this is a lot, we talked about it in economics class. I have been kind of a geek about money for my whole life. We talked about it in economics class and my teacher made a point of saying, this is a historic drop. This is on par with the Great Depression because you didn’t know if it was going to drop another 25% the next day. But so, all of March dropped in one day, in 1987, and did the market stay there forever, Doug?

Doug:
No, it came back.

Mindy:
It came back.

Doug:
And it turns out that most of that was a program trading, right? People were using computer software to protect their losses and that turned into a positive feedback loop, and got worse and worse and worse. 2008, 2009 we almost brought down the country’s entire financial industry and infrastructure behind it. I find that, in retrospect, reading the history books at that time, terrifying. Now, today coronavirus, worldwide pandemic, yes, this is bad, but in no way is it as dangerous to the economy or the longterm future of America.

Mindy:
Yeah. You wrote an article this morning, I’m not military so I don’t spend a lot of time on your blog-

Doug:
I understand.

Mindy:
…Because it is a lot of military stuff that doesn’t really apply to me, but you wrote an article called Fear and Despair in a Bear Market. And I think it should be read by everybody who is freaking out about this market. And I think that there’s been a kind of a gloss over of everybody that we’ve interviewed today, kind of a gloss over of the fact that this is a scary market. This is a really scary market. I thought it was really interesting to hear Brandon, the Mad Fientist, talk about how he’s like, “Oh, I have this plan, but even though I have this plan and I’m logical about it, I’m still freaking out.” It’s an emotional response.

Mindy:
It’s okay to be emotional about it inside. Just don’t let that come out of you in the form of selling your stocks. Because unless, I mean, if you need them to eat, that’s a different story. But if you don’t need them to eat, leave the money in there. You can sum up this whole article by saying, have a plan, and your plan shouldn’t be made today. I like what Brandon said, all of these emotions that you’re going through right now, write them down and in a few months when you’re not in the thick of things, go back and review that. He said that he was really happy with the 100% stocks until he watched it drop 30% and it’s like, you know what, maybe I need a couple of odds? [crosstalk 01:34:43]

Mindy:
Yeah, he had actually already been in the bond market a little bit. So he’s writing these all down, all these ideas. But have a plan, pick an asset allocation, put it on autopilot, turn off the news and go and live your life.

Doug:
Exactly.

Mindy:
And that just, you know what? This is a scary time for everybody, but take a deep breath and just let it ride. And you’re going to thank me, in two years when we’re all recovered, in X years. I should say X, I shouldn’t say two.

Scott:
X years?

Doug:
Yeah.

Mindy:
In X years, when we’re back to where we were, you send me an email and say, “Mindy, you were right, and thank you for encouraging me to stay in the stock market.”

Scott:
So are all the people, who spend less than they earn, invest for the long term, who are working towards FIRE? That’s the movement that’s going to get wiped out by this coronavirus crash, is that right?

Doug:
When I read those articles, I pick up the impression from the authors and the journalists, that the FIRE movement was invented in 2010, right after the recovery began. But we all know that Joe Dominguez, one of the very early financial independence guys, achieved his in the late 1960s, 50 years ago. It took him a few years to get around to writing that book with Vicki Robin, Your Money or Your Life, but people have been reaching financial independence for decades. We reached it, in retrospect, we didn’t know at the time, but we reached it 20 years ago in 1999. I just didn’t understand the 4% safe withdrawal rate at the time. Yeah. Mindy’s doing this because that’s the year she was born.

Mindy:
No, it’s not.

Doug:
But the whole point of this, is that you go through enough of this and you get enough perspective on it, and the math, and the computer simulations, have grown greatly over the last 25 years. That’s why the FIRE movement is so popular today, is because we have the math, the studies, the research, all of that, to enable everybody to find out about it and understand it, and adapt it to their own lives. I mean the World Wide Web has done a tremendous amount to distribute this knowledge. As a guy who went through the 90s, when we were still surfing the internet on 14.4 modems, and trying to figure things out with the HTML. The access, the information has gotten so much better and you can learn so much more, and that again, has led to the growth of the FIRE movement.

Doug:
I don’t see it getting weaker. I see it getting stronger because people are going to stand back and say, if I have another bear market to live through, I have two choices. I could be paycheck to paycheck, hoping that my employer keeps me on and doesn’t cut me off and lay me off, or I could start saving for financial independence and have some assets, and have some financial resiliency. And the next bear market that comes along, I’ll be in a much stronger position, and maybe even ready to stop working for a paycheck. I’ve made my choice and I think that people that are aware of FIRE now, will start making their choices during this recession and the movement’s going to grow even bigger.

Scott:
Okay. I agree.

Mindy:
That is 100% perfect. That’s a great place to end. Doug, can you remind people where they can find you online?

Doug:
Yes, I’m on the Military Guide, and also my daughter and I have a Facebook page for Raising Your Money-Savvy Family. You’ll be able to find that by searching for that phrase. That book is coming out in a couple of months. It’s all about next generation financial independence, which is why I happen to know that the FIRE movement is growing.

Scott:
I am going to join that group right now if you’ll accept me.

Mindy:
Yes.

Doug:
Oh absolutely.

Mindy:
Well, what did Groucho Marx say, I’d never be part of a group that would have me. That’s more of the slam on Scott. I guess that’s not really, yeah, just get rid of that part.

Doug:
Be careful, the first question he’s going to ask you, Mindy, who is Groucho Marx?

Mindy:
I know. Okay. So, we will include links to your very good article on our show notes at biggerpockets.com/moneyshow119. We will also include a link to your Facebook group and we will, because I think that’s really a powerful group to be part of, raising financially savvy kids. It’s tough raising financially savvy kids, especially when they’re kids. My kids are 13 and 10, and we moved into this neighborhood a very long time ago, and my daughter comes up, she’s like, “How come this kid has more toys than I do?”

Mindy:
I’m thinking to myself, well, because her parents never spend time with her and they’re trying to buy her love. And that’s a super judgy thing to say but listeners of this show know that I’m super judgy. And it’s just hard to be in an environment where everybody else has everything else and you’re like, but you don’t need seven American Girl Dolls. You don’t need 27 bikes, you don’t need all these things, so you’re not going to have them. And you still have love and shelter, and all of that. And it’s much better.

Doug:
We talk about all those moments, those are teachable moments. And one of the jokes we used to have for our daughter when she was that age was, well, you could have all this too, you’re just going to have to go out and get a really good job and save your money. And then we’d start talking about how much that it costs and whether it’s valuable, and there’s a whole bunch of lifestyle lessons to be learned by an American Doll, that’s for sure.

Mindy:
There you go, yes. So we will include links to all of these things in our show notes. And Doug, thank you so much for joining us today. I think it’s really important to hear from people who have been through it, and been through it in large quantities, and it’s just going to work out.

Doug:
I’m here to help. And I’m not going to tell you it gets easier with every bear market, but I will tell you that you get more experience.

Mindy:
Well, I would like it to get easier.

Doug:
As soon as we know. As soon as the bell sounds to say this is all going to be over, please tell me.

Mindy:
Yes, I will do that, as soon as my crystal ball clears up.

Doug:
Exactly.

Mindy:
Okay. Thank you so much for your time, Doug. We’ll chat. Oh, and I’m sorry, I meant to say, Doug is the only person that we talked to today that has not yet been on our podcast, but as soon as this book comes out, we will have him and his daughter on to talk about the book and raising financial illiterate children, and pretty much anything else you want to talk about, Doug, it’ll be your show.

Mindy:
Okay, Scott, give me your impressions of this whole episode.

Scott:
With the exception of Andy saying, “Hey, I just wish I had retired sooner or I left my job sooner”, that was the only one where I was a little surprised. Everything else is exactly how you’d expect these folks to handle the situation, right? Because again, like we said in the intro, this financial independence is literally the act of planning to retire through good times and bad, right? If you’re not planning on being able to withstand a recession with your portfolio, you’re not financially independent. And that’s just, I think, been beaten into the community so thoroughly that all these folks who are longtime members of the community and longtime retirees, most of them really just have that down and aren’t worried about their financial position.

Mindy:
Well, as I alluded to at the beginning of this episode, I was actually surprised by a couple of things that Andy said. Number one, what would you have done differently? I would’ve quit my job sooner. I was surprised by that and I’m very pleasantly surprised by that. But when we asked him, hey, what are you going to do with this money, or how is this going to shape your investing, it’s like, I’m going to put more in the stock market. This is somebody who doesn’t have a traditional job right now, just left his traditional employment job, and is starting out on his own. But after we stopped recording, he said that March was his best month ever.

Scott:
Yeah, I mean, it just goes to show that the right habits will sustain you through good times and bad. And look, Andy is either a millionaire or very close to it, right? I think he’s just shy of a millionaire, right? And he’s starting a business. So guess what? The fact that he’s starting a business means that his business is growing right now, and it would have grown in good times, it will grow in bad times. Because, he’s going to be a great businessman, with a starting that business from a position of financial strength. Right? And so I think that all of them are in really good position and he’s no better or worse than anyone else. He’s maybe in a little bit better rep position as an entrepreneur and control of his own destiny.

Mindy:
Yes. And the other really surprising insight was from the Mad Fientist. I know him personally, he’s a friend of mine, and he’s just Mr. Cool, calm and collected. He’s a computer programmer. He is, I don’t want to say he’s the stereotypical computer programmer, but he kind of is. He’s not emotional, he’s not passionate, like fly by the seat of your pants kind of gut reaction. And it was still really interesting to see him say, “I freaked out, I second guessed myself, I wasn’t sure and I missed a key place to put more money into the stock market.” So frankly, it’s reassuring to know that he’s… I mean, in the space he’s held in very high regard, and even he has a bit of a moment. And that’s reassuring to know that it’s okay to feel like freaking out, it’s okay to freak out, just don’t react poorly.

Scott:
Yeah, I mean, if people as brilliant and seasoned and involved, and people that are the type of student of finance that Brandon and Mad Fientist are, if he’s making mistakes, everyone’s going to make mistakes. Everyone’s going to have emotion. It’s okay. We all do the same thing, right? I think that’s a really wonderful observation, Mindy. And I think that it’s very powerful to see that from him.

Mindy:
Yep. And he’s still investing. He is a student of the market. He’s, oh God, I think he delights in his spare time reading IRS documents. But I recommend his article about how to access retirement funds early almost every week. It’s a really great article. And for him, I mean, he just seems like such a rock solid, and for him to have an emotional “Oh, is this the right thing to do?” It’s just nice to see. It’s not nice to see like, yay, he’s freaking out, hooray. But you know what I mean, it’s nice to see that he’s human too. And it’s nice to know that freaking out isn’t necessarily an off response.

Mindy:
So Scott, this show is called “Coronavirus, is it Time to give up on FIRE?” I’m going to ask you, is it time to give up on FIRE?

Scott:
I don’t think so. I think this is exactly what FIRE community members are perfectly prepared for, and I think that if anything, it’s going to enforce the lessons we all learned from the great recession, where it’s important to have emergency reserve, it’s important to have multiple sources of income, it’s important not to rely on just your job for your financial future. It’s important to be able to retire, or move dependence on that, as early as you can in life. And that’s how you sit pretty, feel comfortable and ride any type of economic environment out from position of strength.

Mindy:
Well, I don’t know what the audio equivalent of mic drop is, I don’t want to drop the mic because then that makes weird sounds so, but yeah, boom. The end.

Scott:
This is Mindy’s mic actually, and she’s clearly labeled it, that we should not be dropping it.

Mindy:
Oh, did you see my little note?

Scott:
I did, yes. I think it says… I think I’ll post it… No, that we’ll unplug the mic so you won’t get to see it, everybody.

Mindy:
Yes. No, it is a very forceful warning, do not steal my little plug adapter. Because, it was being stolen all the time, it was really frustrating. Okay. Scott, this was an epic episode and we need to leave. From episode 119 of the BiggerPockets Money podcast, he is Scott Trench and I am Mindy Jensen, and we are encouraging you to stay the course and we’ll see you next week.

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In This Episode We Cover:

  • How Andy’s life changed after his last interview
  • Andy’s feeling about his decision to quit his job and build his own business
  • Andy’s financial position before he left his job
  • One thing he wished he would have done differently before he left
  • Amy and Tim’s plan after retirement
  • How they withdraw from their stock portfolio to sustain their lifestyle
  • Amy and Tim’s advice for people who want to follow in their footsteps
  • How prepared Brandon was
  • Brandon’s opinion on the 4% rule
  • What he recommends having as a cash buffer
  • Brandon’s advice for people who are on the journey to financial independence
  • Bryce and Kristy’s traveling routine
  • Continuing to invest their money in the stock market
  • The reason why Doug is not concerned about the recession
  • And SO much more!

Links from the Show

Books Mentioned in this Show:

Tweetable Topic:

  • “Think about what’s on the other side and let that guide you in your decisions.” (Tweet This!)

Connect with Andy:

Connect with Amy & Tim:

Connect with Brandon:

Connect with Kristy & Bryce:

Connect with Doug:

The BiggerPockets Money Podcast is for anyone who has money… or want to have more! Join BiggerPockets Community Manager and Podcast Director Mindy Jensen and CEO Scott Trench weekly for the BiggerP...
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    Julie Stevens
    Replied 4 months ago
    Hi! This is great info and good to hear how everything is working out so far. I do have a question, of the 4 interviews, I don't recall anyone mentioning currently owning real estate, but stocks sound like the source for pulling income, other than cash savings. Did you all cash out of RE and now all in stocks, bonds, etc? Trying to decide if I should sell and cash out for other investments as I have 95% of my investments in RE. Thanks for any feedback! Julie