BiggerPockets Money Podcast

BiggerPockets Money Podcast 136: Secrets of a Money Savvy Family with Doug Nordman and Carol Pittner

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Doug Nordman wanted to teach his daughter about money. But he knew that to get it right, he’d have to start when she was very very small. So he did. First, he taught her how to count, then he taught her how to add, then he showed her what she could do with money by using cash in transactions.

As Carol got older, she was able to handle the cash herself, learning how to make change, count change, etc. Carol started “earning” her own money, through allowance and jobs – which could only be done after her (non-paid) chores were complete.

Doug’s common-sense approach to teaching his daughter about money is actually quite brilliant. She starts learning about money – and making money mistakes – when the stakes are low. Your 8-year-old making a $20 mistake is far better than your 20 year old making a $10,000 mistake because he or she never learned how to manage money.

Carol joins her dad to talk about how these teachings affected her life – and how she is planning on teaching her own daughter about money and finances.

Carol and Doug have combined their recollections of this time together and written a book called Raising Your Money-Savvy Family For Next Generation Financial Independence, and it is the blueprint for exactly how to raise children who are ‘good with money’ and how to prepare them to be adults who are great with money.

If you’re struggling with how to teach your children about money, this is a must-listen episode.

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Mindy:
Welcome, to the BiggerPockets Money Podcast, show number 136, where we interview Doug Nordman and his daughter Carol Pittner and talk about raising a money-savvy family.

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Doug:
You also have to start learning those skills early, you might as well start at a young age with a little bit of money and make a lot of mistakes rather than start at a later age, in high school, or after high school and in your first job making big mistakes with big amounts of money.

Mindy:
Hello, hello, hello, my name is Mindy Jensen, and with me as always is my unparalleled co-host, Scott Trench.

Scott:
Yeah, you’re really just taking the right angle with these adjectives every show, Mindy, thank you.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else, and show you that by following the proven steps, you can put yourself on the road to early financial freedom and get money out of the way so you can lead your best life.

Scott:
That's right, whether you want to retire early and travel the world, go onto make big-time investments in assets like real estate, start your own business, or raise a money-savvy family, we'll help you build a position capable of launching yourself towards those dreams.

Mindy:
Scott, I am super excited to have Doug and Carol on today because they are the authors of a new book out.

Scott:
That’s right, and their book is called Raising your Money-Savvy Family for Next Generation Financial Independence, and yeah, it’s just a wonderful, wonderful dynamic between father and daughter, Doug and Carol, and how Doug achieved financial independence before, well, it’s always been cool, but before a lot of the rest of us caught onto this subject. He’s been, I think, financially independent for 18 years, is that right, Mindy?

Mindy:
No, you’re not doing math right, Scott, he was financially independent … Oh wait, did he said that it was 2002 that he retired?

Scott:
Something like that, maybe, yeah.

Mindy:
Oh, 18 or 20 years, let’s call it 18-ish.

Scott:
Yeah, so he’s been retired for a very long time, financially independent for a very long time, she saw that growing up and I think that he really had a positive and productive way about introducing Carol to a lot of those concepts that she then applied right away in college as an ROTC student, they’re a Navy family. Now, with her career and has already achieved Lean FI prior to her first-born child, which I just think is a fantastic generational story here. A lot to learn, really fun dynamic, and I think you’re going to hear a lot of the same fundamentals that we talk about week to week applied through the generations now.

Mindy:
Yeah, the stories that they tell are very interesting, but they are not new to the listeners of this show, it is the same principles over and over again, track your spending, spend less than you earn, invest what you’ve saved into equities and real estate and wealth-generating vehicles that will appreciate over time, fingers crossed, hopefully. It’s a very repeatable story that they are sharing with us, Doug Nordman and Carol Pittner, welcome to the BiggerPockets Money Podcast, I’m super excited to have you on the show. Doug, I’m excited to have you back on the show, and Carol, I am excited to have you on the show and to meet you in real life. I’ve known your dad forever, but it’s nice to meet you in real life because I have heard so much about you. So, welcome to the show.

Doug:
Thanks, Mindy, and-

Carol:
It’s good to be here, thank you.

Doug:
… it’s okay Carol, it’s all good, that’s the only stuff I’ve told her is the good stuff.

Carol:
I hope so, yeah.

Mindy:
Yeah, but I read the book so I know it wasn’t all perfect.

Carol:
Yeah.

Mindy:
Okay. So, Doug, before we jump into how you taught your daughter how to be financially savvy, let’s talk about how you learned how to be financially savvy, where does your journey with money begin and how did you learn to be so smart?

Doug:
Well, you’re going to give me a lot more credit than I’m actually due, but I was one of those kids that naturally a hoarder when I grew up, a hoarder of money and so to me it was always easier to hang onto money and I did pretty good when I was growing up. Then when I got to college, I found this whole new world out there of things that I desperately needed to spend my money on and the next four years were kind of rocky. After I got out of college and started my career in the Navy, it was back to being a saver again, and I’d gotten tired of running out of money at college before the end of the month and I’d finally changed that around. I didn’t really learn about tracking your spending and cutting out the waste and budgeting and investing until in the mid-80s when my spouse and I got married.
When Marge and I got married, that’s when I first started to raise my game and learn a little bit more about investing. Then of course, when you start a family, that’s when you realize you’ve got to behave like a grownup now, and really take care of your family, really take care of your finances.

Scott:
So, what did that inflection point look like for you? Where were you when you started the family and began to say, “Hey, I’m going to get really more intentional about building wealth.” And what was your relative position before that and then what were the changes you made following that?

Doug:
Well, I graduated from college in 1982 and Marge graduated in 1983, and then-

Scott:
Thank you.

Doug:
Yeah. We got married in 1986 and Carol came along in late 1992, and so for the first six years of our marriage, we were always tracking our spending because we wanted to make sure we were using our money well and we were optimizing and cutting out the waste and all of that. But we did have money for the entertainment budget, life was good, we were doing a fairly good job of saving at least one of our two incomes. But on the other hand, we were not averse to spending it for things we valued, and then Carol came along, and suddenly our lives had changed. But that was the first time in my life in my 10 years that I’d been in the Navy at that point where I realized I wanted to spend more time with family and I wanted to spend more time watching my baby daughter grow up and find other things to do other than working in the submarine force, other than working in an office, other than working mid-watches and weekends.

Scott:
Love it. So what was your plan at that point and how did you address the immense costs of having Carol here, offsetting that plan?

Doug:
Well, it was a combination of things, by this point we were pretty good at budgeting, and we had been tracking our spending obsessively, and shortly before Carol was born, I actually bought my very first copy of Quicken, the software, and so I had a lot of fun setting that all up. We also knew, as brand-new parents in 1992, we knew that you had to save money for college, and so we had figured out roughly what college was going to cost in the year 2010 as if we had a clue. Then from there we figured out how much money we needed to set aside every month to save for college, and so we started doing that, and as we started working on our budget and the expense of raising a child, of course, at first it’s not that expensive because you’re really only paying for feeding and diapers, a lot of diapers, probably a lot more diapers than feeding.

Carol:
A lot of diapers.

Doug:
A lot of diapers, yeah, my daughter has a keen appreciation now for how many diapers it takes. But the other things started to fall into place because we'd always been the kind of people who would rather go out there and buy something from a thrift store or a garage sale. So, when you're accumulating … Oh, I see Mindy's really happy about that. When you're accumulating all the possessions you need, you're amazed at how much it takes to have one baby come into your house. But we managed to do that all from garage sales and thrift stores, and it worked out quite well, we kept that up as we were raising Carol. There was one part of the book where we talk about how much the US Department of Agriculture thinks you should spend on raising your child, and the numbers change every year, of course. But when we looked at our data for our 15-year-old and then 18-year-old, and did all the math, we only spent about two-thirds of what the USDA thinks you should spend to raise your kid.
Again, it’s tracking the spending, and goodwill, thrift stores, garage sales, those kinds of places, kids don’t need a lot, they need a lot of your time, but they don’t need a lot of your possessions.

Mindy:
That is so true, and let’s throw some numbers out here because saying two-thirds doesn’t really have the impact as the numbers themselves. The USDA says that it will cost $233,000 dollars to raise a child-

Doug:
You’ve got to say that in a Dr. Evil voice, “$233,000.”

Mindy:
$233,000 to raise a child from zero to 18, and I agree with you, that’s total garbage, I only have a 13-year-old and a 10-year-old, but I haven’t spent $233,000 on both of them, and 13 plus 10 is 23, so I’ve raised more, I mean, a lot-

Doug:
You’re halfway there.

Mindy:
I’m halfway there. You said, this makes me laugh, you dug into your family’s financial archives and estimate that it cost you $156,000 to raise Carol, and that’s my word, estimate, it was probably like $155,997.12 because you have family archives to dig into. What are you, the godfather of spreadsheets?

Doug:
You can tell, Carol, that Mindy and I have spent a lot of time together, and she knows me very well.

Carol:
Oh, yes, oh, yes.

Mindy:
So, what did you deprive Carol of?

Doug:
Well, that’s a good question. I’m not sure we deprived you of anything that you needed.

Carol:
You really did not, a lot of the things that were “depriving” were things that I actually needed to learn, you did not buy me a car for my sweet 16, and I learned how to deal with that. I mean, technically you could have paid for college, but I got my own ROTC scholarship, so you didn’t have to pay for that, and a lot of the allowance that I was getting, a lot of the money that I was wasting, so to speak, was all the stuff that you were going to spend on me anyway, you were just giving me the opportunity to figure out how to spend it, and another opportunity to spend it, and another opportunity to mess it up, so on and so forth.

Doug:
Well, I’d rather have you learn those lessons while you’re younger, when you’re working with a smaller amount of money, than when you’re older.

Carol:
Mm-hmm (affirmative).

Mindy:
So, Carol, you never felt deprived as a child, did it ever feel weird the way that your parents were raising you because I know that in my own personal experience, first of all, I never felt like it was weird to shop at thrift stores or garage sales as a kid because that’s how you shopped. I said this before on the show, we woke up every Saturday, my dad would get out the newspaper and the map of the city, and he would circle all the garage sales he wanted to go to and then make the most expeditious map based on tools go first. So he would go to the tool garage sales first and then fill them all in after that, but that’s what we did every Saturday, I don’t remember a Saturday we didn’t do that. So when you start at the beginning and you make it like that, that’s just the norm, but then you meet people and they are different, and their parents don’t go to a garage sale ever.
Maybe they make a comment like, “Ew, that’s Mike’s shirt, why are you wearing Mike’s shirt?” And you’re like, “Well because I liked it and it was at the garage sale.”

Carol:
“You don’t know where those have been before.” Yeah.

Mindy:
Yeah.

Doug:
“Ew, you got your clothes from dead people.”

Mindy:
Who cares, I have a washing machine, I have a washing machine.

Carol:
Yes, and that was the other thing was one of my Navy bosses put it best he said, “There’s normal and then there’s Nordman.” And it was from a very early age it’s like, “We’re not a normal family and I know we’re not normal, but it’s normal for us to be not normal.” So it all worked out in the end. My mom was very similar, her Saturday morning entertainment was going to garage sales, and of course, I would come along, it would be like our girl time. We would not only look for toys, we would also look for clothes and books and all kinds of stuff, and that really ended about the age of teenagerdom when I had my own job and that job was on Saturday mornings as well. So, mom would still go and she would go to those garage sales, but after I finished work, I’d come home and mom would have new clothes from a garage sale, or new toys or something new from all the shopping that she’d done that morning.
What’s also funny is, for both my parents and for me, we’re in the military and the military community has a very good buy/sell/trade setup, it’s very easy for us to recognize that the majority of us are going to move in the summer, which means the majority of us are going to start cleaning out our house in the spring, which means the best garage sales are going to be right at the edge of spring in the beginning of summer. So I kind of learned growing up to not buy too much stuff because someone else is going to get rid of theirs, and it’s going to be, if not perfect, close enough.

Scott:
Love it. So, when we’re painting the rest of this story, Doug, of your financial journey, it sounds like you’re having a career in the Navy and you’re moving around from duty stations across periodically, is that not true? I saw you shake your heads.

Doug:
Yep, you start your career and initially, there’s a whole bunch of schools, and so you might be moving to a new location every six months, as frequently as that. Then you finally get to your first command and you’re there for two to three years, and after that, it’s a two to three-year cycle. Now, sometimes you get fortunate to land in a great big place where there’s several jobs, maybe you’ll be there for two, maybe even three tours. But the military still feels like you have to move around to get experience everywhere, that’s not a philosophy I agree with. But that moving around, eventually, you have finished say, a 20-year career, you might have easily had seven or eight or 10 moves. My spouse and I between us when we finished our careers, had moved 13 times, Carol, how many times have you moved?

Carol:
Four times in six years. So I went from Houston, Norfolk, Norfolk to Spain, Spain to Charleston, Charleston back to Norfolk. Oh, five now, and now Norfolk to Monterey, California, so I’ve been to five different moves, and that was the thing, was that mom and dad did all those moves before I was born. So by the time I was born, they had been stations in Pearl for now tour number two, and there was only ever one time we had to move, that was when I was about a year and a half old?

Doug:
Yeah.

Carol:
And mom and dad had to go to San Diego and they did that one tour and they decided San Diego is not the place for them, and they ran as fast as they could back to Hawaii, so I actually started kindergarten back in Hawaii again.

Scott:
Got it. Okay, so your experience, you didn’t really see as much of that movement growing up, but that’s kind of the typical, at least when you’re starting out a career in the military, is that-

Doug:
Exactly. Yeah, it’s considered normal to move every two to three years in the military, sometimes even a little more frequently than that.

Scott:
Mm-hmm (affirmative), and my general understanding, and please feel free to fill in the gaps, and then I want to hear Carol’s story here as well, but is that you kind of applied this discipline throughout your career to your spending and investing and were able to finish out with a really solid financial fortress by the end of your military careers, is that right?

Doug:
It all starts with tracking your spending, and once you start tracking your spending and you’re aware of where the money is going, then the next thing after that you’re going to do is you’re just going to cutting out the waste. You’re going to spend the money on the things you value and you know you value it because you’re going to be willing to work for it, maybe you’re going to have for extra years to afford something that’s really valuable to you. But when you cut out the waste, then your savings rate starts to rise, and I tell people, I’m not a brilliant investor or I was not really especially savvy at anything except tracking the spending and what succeeded for our financial independence is the high savings rate. Once you get that high savings rate, everything else falls into place.

Scott:
This is where I insert my lame, “It sounds like you didn’t spend like a sailor.” Comment.

Doug:
No, that’s right, yeah. Not even like a sober sailor, yeah.

Mindy:
Okay, so when you say high savings rate, this is something you say in the book multiple times, what is a high savings rate to Doug Nordman?

Doug:
Well, the savings rate that we kept up for most of our 20 years in the Navy was about 40%, now sometimes it would be lower than that, when you're in the middle of a transfer or when you're in a very high-cost living area and you haven't figured out how to cut the expenses and then spend money on things you value. There were a few times where, for example, we had bought a home and actually paid off the mortgage and when we had paid off the mortgage on that house, our savings rate was above 80%. Now, that's because we're both employed for most of our careers, but overall, 20 year period, after a couple of years and a couple of promotions we were able to save 40% of our money for most of those two decades and I think, Carol, you were pretty far up in there. Is that 40% something that you started doing a couple years after college?

Carol:
Oh yeah, and part of that was natural. The way that an O1 is paid in the Navy, if you add in the 401k, the TSP, plus the Roth IRA, at the time it was about $24,000 to $25,000 and that naturally was 41.67% of my paycheck, and we put all that math in the book too. So it was very easy, if I just tried to max out my IRA and my TSP as it’s called, then that was really all I had to think about, and I didn’t really have a lot of bandwidth my first couple of years in the Navy. I was trying to learn how to drive a ship, I was trying to learn how to leave a group of sailors that were anywhere between 10 and 30 sailors, and their ages were anywhere between 18 and 40. It was a very different dynamic, and so I just didn’t have the time to think about it, it was easier to just keep shuffling money on autopilot, into all my accounts before I could figure out what I was going to do with it.

Mindy:
Oh, that’s a really great quote.

Doug:
Too busy to spend.

Carol:
Yes.

Scott:
Carol, could you describe your outlook on finance and your approach to money graduating high school maybe and walk us through that and how Doug’s story maybe influenced some of that as well?

Carol:
When I was a younger, younger kid, Mom made a very good quote to me she said that, “Having money gives you choices, and it’s not exactly the right amount of money that will keep you super-rich, and it’s not about being bankrupt proof, it’s about having choices.” So she never really set that numerical amount, it was just, “Try to have money in a way that you would have choices.” And when I got to high school, that came screaming obvious and that was because I was in high school between 2006 and 2010, so I saw the very best of the housing bubble, and then I saw it burst. By my senior year of high school, the state of Hawaii was so in debt they couldn’t afford paying for five days of public school a week and so they actually had furlough Fridays where certain Fridays of every month everybody was told, “You are not allowed to come to school, we will arrest you if you come to school.” Because they couldn’t afford to pay for the lights and the janitorial staff, and everything that you need to run a school during the day.
Then as well, you're seeing all the worried faces of kids where they're wondering if they're going to have to transfer high schools because mom and dad can't afford the house anymore. You see the teachers who were inching up on retirement and now realizing they're not going to be able to retire like they want to and there's going to be some bitterness involved with that. So from the get-go, my attitude was always, "Make sure you have choices." Then when the recession hit, it was, "This is why you need to have choices."

Scott:
Mm-hmm (affirmative). So what does your personal financial story look like? I assume during your childhood years you were able to earn and accumulate something, I would be surprised if that’s not the case based on what I’m hearing, but could you walk us through that?

Carol:
I was never a good entrepreneurial spirit, I was never the person that actually started a lawn mowing business or the car washing business, there was too many other good things to do. What Mom and Dad set up for me was an allowance and then I had to know the difference between chores and jobs, so chores I had to do without money, it was the kind of thing that I needed to do, otherwise, I would lose privileges like being able to watch TV or play with my PlayStation or my Game Boy Color or ride my bike, things that kids like to do. But then when it came to jobs, that was on my own initiative, once I finished doing all my chores, I could make as little as maybe one or two dollars every 15 minutes when I was six or seven years old. As much as $10 and $15 when I was 10 and 15 years old, and it was on my own initiative, so Mom and Dad would say, “Hey, we have this wall to paint, do you want to help us?” And I could say no, and a lot of times I said no.
But there were also a few times where I said yes, the other thing is that when I was coming up from elementary school through high school, I had a hard time with math, subtraction was a struggle for me in first grade, and there’s this program that some folks have heard about, it’s pronounced Kumon, and it’s a Japanese company that’s worldwide and they teach math and reading, and depending on where you are in the world, they also teach Japanese. So I had been in that program for something like eight years before my teacher looked at me and said, “Hey, do you want to work for me as well? I mean, you’ve been through this program, you know what it’s like.” And hook, line, and sinker I was in. So I started with a job at age 14, I had it all the way up until 17 when I left for college.

Scott:
And what did you do with the money you earned from those jobs?

Carol:
So the good news was that I already had a Roth IRA, someone was able to help me out with that setup to make sure it was all ready to go. So I would say something like 80-90% of it automatically went to that IRA, the last 10%, coming out of 14 and into 15, I finally saved up enough money to buy my own cellphone, and it was a pay as you go plan, it was no smartphone, it was the brick, you have the click through the buttons multiple times to get through all the letters. It didn’t have Snake on it the first time, it was a very, very basic brick phone, but it was important to me because, by that point in high school, other kids were getting Motorola Razrs, those were the cool phones at the time and I was missing out on study groups, and I was missing out on weekend hangouts because people would try to call the house not realizing that that was a house number and not my cellphone number. So it was my own personal initiative to make sure I could stay in the social loop at school.

Scott:
Awesome. So what kind of general relative position did you graduate high school in and could you walk us through your college choice and beginnings of the career following that?

Carol:
So, Mom and Dad went to the Naval Academy and they both did 20 plus years in the Navy, and the last thing they wanted me to do was to make the family business the Navy, so that’s what I did anyway because I’m a rebellious teenager and I decided I wanted to do that too. I don’t know how to explain this, I don’t understand the history, but there’s the Naval Academy and there’s also Naval ROTC, but not every place in the country has Naval ROTC, and for reasons I didn’t understand, Hawaii did not have Navy ROTC. You would think with Pearl Harbor right there-

Doug:
Oh, well, there’s this unfortunate 1960s protest where the ROTC building went up in flames, and it took a long time too, for the Navy to trust UH enough to come back.

Carol:
About a year and a half ago, that’s when UH, University of Hawaii, UH finally said, “Yeah, let’s have Navy ROTC back.” So I actually went to the Navy ROTC website where they list every single unit and I took that list, I knocked off everything over 15,000 students because I came from an island, I had no idea how I was going to handle a big town.

Doug:
A small school.

Carol:
Yeah, and then I knocked off everything under 15 degrees Fahrenheit because I’m from Hawaii.

Doug:
Let’s just say that the Notre Dame school experience was not what she wanted.

Carol:
Right. Notre Dame was like, I’m going to barely let you on the list, and then from there that came down to a handful of schools, that was Notre Dame, there was this little place in Houston called Rice University, no one cares about that, a couple of West Coast schools, a couple of East Coast schools. Then Mom and Dad said, “Okay, you have a list of eight schools, let’s go check them out, let’s go do the college campus tours.” And I am so glad we did that because that little school down in Houston called Rice University turned out to have the best campus atmosphere. So when I went to college, it was Navy ROTC paying for college, but I also enjoyed the civilian lifestyle, I still had fun with friends on the weekend. I still could leave the campus any time I wanted to, if I wanted to go get pizza on a Tuesday, let’s go get pizza on a Tuesday, and it was a lot of fun that way.

Scott:
Awesome. So you were able to then have the Navy pay for your college education, so hearing from your story it sounds like you were able to graduate ready for, I think it’s a five-year commitment in the Navy, is that right?

Carol:
They just changed it to five years, my year was the first group to have a five-year commitment. So going back to high school Carol it’s, “Hey, you have the Navy paying for college, you’re going to be able to enjoy college, and then when you finished college, you have a ready-made job.” Didn’t have to do the internship thing, didn’t have to do the scramble in senior year, didn’t have to try to fit in interviews in my senior project. It was, “Hey, you already have a job waiting for you.” And not only did I have a job waiting for me, this was a job that was going to let me travel the world and do a lot of cool things that most people don’t get to do. So it was a way to gain that all-encompassing experience in a way that was different than everybody else.

Scott:
Awesome. So I imagine following the timeline here, those five years have passed, so can you walk us through your story in that journey and where you’re at today?

Doug:
She saw the world and she’d seen enough.

Carol:
Yeah. One of the pieces of advice Mom and Dad gave me, and I’m glad they gave it to me was, “Go overseas first so that when you have a family you can stay stateside and you can stay where it’s a little bit more normal so to speak, you’re not dealing with a different culture and you’re trying to figure out how to get kids in school.” So that’s what I did, I somehow managed to land one of the first ships that went out to Rota, Spain for my first tour, and it was a lot of work. Out of the 19 months that I was assigned to that ship, I spent 13 months underway, and of the six months that I spent in port, only four of those months were consecutive, and I was only spending maybe five days a week actually going home at night. It was work all around the clock.

Doug:
She got really, really good at her job.

Carol:
Yeah, really good at my job, no time to spend money, and occasional port calls, I was very good about doing dinner and postcards because that was really all you had time, you landed at 6:00 PM and you might have time to fit in a meal before you have to go back to the ship again. So had those adventures, went through 12 different countries in and around Europe and the Mediterranean, and then I was also a nuclear candidate like that, unfortunately, I failed out. But I did go to Charleston, I did go to Power school for about eight months, and when I finished at power school, they said, “Well, you’re not going to be able to work on a nuclear power plant, so you can’t be on a submarine, and you can be on an aircraft carrier, but you can’t work down in the plant, but you can work topside. Tell you what, that’s what we’re going to do, we’re going to have you assigned to an aircraft carrier.” So I was put back in Norfolk.
By that point, my husband and I had actually gotten married, and so he was also in Norfolk, we could actually live together within our first year of marriage, which is amazing. There’s a lot of military families that don’t get to do that, and so now I was on the brand-new USS [inaudible 00:26:18]Ford, sitting in Port Norfolk, and doing all kinds of basically project management. I had a two billion dollar radar system, a couple of other millions of different kind of equipment lying around, and a team of 30 sailors that we all had to pitch together to get this to work. After that tour, I was burnt out, I’d gone all the way from Spain, all the way back and I was dealing with all kinds of different personal problems with my sailors, and all kinds of professional problems with Navy contracting and shipyard. I had the worst commute of my life, it was only 20 miles but it could take anywhere between 45 minutes and two hours to get there, which by the way, thank you BiggerPockets Money because you gave me something to listen to during that.

Scott:
Oh, great.

Carol:
After spending 4:15-

Doug:
You kept her sane during those commutes.

Carol:
Yes.

Scott:
All right, yeah, we don’t even keep Mindy sane, so that’s impressive.

Carol:
So I decided I was done, and I decided that I needed a break, so I switched from active duty as they call it, to the reserves where you can choose how much you want to work, and we’re kind of glad, and I say me and my husband are kind of glad because after I switched to the reserves, about two weeks after I left my ship, I found out I was pregnant and it was like, “Oh, that was perfect timing, now I can be at home all day with our daughter.” And then our daughter was born two months before COVID-19 hit, it’s like, “Okay, I can actually be at home with my daughter all day, I’m not worried about trying to telework a job and keep the kid out of everything else going on.”

Scott:
Wonderful. I was just going to ask if you could walk us through, as well, just a quick overview of your financial position moving through those things at a high level, so how much you were able to save during those years and what positions you entered into financially when you went to the reserves?

Carol:
When I was first active duty and I was underway in Spain, I spent anywhere between 40% to 90% on a high savings rate, so I was saving as much as 90% because I wasn’t home all month, and then when it got to the reserves, the savings, funnily enough, it actually stayed. So what had happened was even though I wasn’t working anymore, all the things that came with having a two-parent working household stopped. We didn’t buy as much food eating out, we didn’t buy as many movies to just sit there on the couch and watch, we didn’t need two cars anymore so that all went away. So now that we’ve been doing the one parent working, one parent at home lifestyle, our savings rate is still hovering between 40 and 50%.

Scott:
That’s awesome. One of the things I want to ask you as well is it sounds like you were able to sock away a lot into these retirement accounts, did you have other types of investments or liquidity, like maybe a big cash reserve or something like that, that helped make the decision easier or was that just based on the savings rate

Carol:
I did have some money left over from high school and college, and then when I came out of college, I already had my Roth IRA that I’d been investing in since I was 14, and then now because I was in the Navy, I could also start up TSP. So it was the kind of thing where I would try to do TSP in a monthly amount, but IRA, like you mentioned, I would try to shovel that in right on January First. Just try to get that all lump sum, on and done, and so I was saving at least, this was 2014 onwards, so at least $24,000 just in those two accounts. I also had a brokerage account, and in the months where I just wasn’t home and I didn’t have the opportunity to spend money, I would shovel as much as I could into that brokerage account. I think the average was right around $1000 a month every year, so that puts together altogether about $36,000 give or take, every year.

Scott:
That’s awesome, and I have one more question before I know Mindy has a question she’s ready to ask. But one more before we get to that, how does your behavior and your opinion, based on your experience working with other folks, and I know it’s private, but how does it compare to you think your peers in the Navy in similar roles to you?

Carol:
There’s some things that you can see in person, there was a very memorable port call where there were three of the officers that were gathered around the table the next day and they were sorting through the several thousand dollars that they spent on scotch, sometimes I just see those stories in a snapshot. But what was also different was that there was a game you played called love or money, are you staying in the Navy because you love your job and you absolutely want to keep going because this is the kind of lifestyle for you? Or is this a job that you’re in because you need the money because you’ve already spent the money on your car and your house and your pets and your spouse and your kids and at this point, you need to keep that steady paycheck going? Especially in times where there’s a recession or there’s a global pandemic, and so it was more obvious in that they had the individual port calls where people were making bad decisions. But then it was also obvious when people would talk about what they were doing on the weekend, “Oh, well, I’m going to go home, I’m going to take care of my lawn, I’ve got to go buy my y 16-year-old a new car because she crashed it over the weekend.”
It was those little subtle things, there was never really an outward discussion about money.

Scott:
I’d be willing to bet, is what I’m trying to get to, that your behavior dramatically differed with money than maybe some of your peers. Nothing about what you said to me sounds completely unrepeatable, from a career in the Navy there over the period you’re in there. But I think your result is likely hundreds of thousands of dollars different from other folks who go through a very similar career experience.

Carol:
Quite literally.

Scott:
Yeah, I think that’s what we’re excited about for today’s episode.

Carol:
Mm-hmm (affirmative). One of the little nice things was that when my husband and I were thinking about, “Hey, should I stay active duty, should I go to the reserves?” We opened up all our accounts, we tallied up everything, we did the 4% savings withdrawal rate and we realized, “Oh, we’re at Lean FI already, we’re the 26-year-olds and we’re at Lean FI. When did that happen?”

Doug:
“Now let’s start a family.”

Carol:
Right, “Let’s start a family.” And we’re not quite done, my husband still loves what he does in the Navy, so we’re not quite done doing everything we want to in the military and so our portfolio isn’t optimized right now for the 4% withdrawal rate. We’re not optimized to be able to just do nothing all day, but at the same time, we can slow down, we can spend all day with our daughter if we need to. We can focus on the family even though there’s still work in the background.

Scott:
Awesome.

Mindy:
So, this is interesting that you bring up your husband because that’s the question that I wanted to ask, a lot of listeners have this same question, “How do I get my spouse on board?” So let’s talk about Mr. Pittner, what was his view on money before you met him? When did you first discuss finances? Did you at all discuss finances, and how did you convince him to come over to the dark side?

Carol:
So, it was, unfortunately, a hard beginning for my husband, he was born a little bit earlier than his parents expected, and at the time that he was born, his dad was still finishing up his Ph.D. in medical research. So he was going to have a good job, but he’s still a Ph.D. student, and in the meantime, his mom is working multiple jobs to be able to keep the income stream going for the family. So they were right at the poverty line, money was a very rare thing, it was to the point where some meals were oatmeal and rice, it was a hard life for him for a few years as a kid. And as he got older, dad was able to work more and do more jobs, and so he saw the family wealth growing, but he recognized that when he went off to college, and he also went to the Naval Academy, again, totally did not plan that, but it happened. When he went onto the Naval Academy, he learned to be smart with his money, he didn’t know about TSP, he didn’t know about Roth IRAs, he didn’t know about the investment.
But he knew that he needed to at least make sure his bank account wasn't zero, one of the other things he did was he did what most new naval officers will do, he took what's called the career starter loan, it's a $25,000 loan that people get at the beginning of their career, and he spent it right on a car because that's what most people do. So he had this very low-level one to two percent loan, he had a car, he had a few household possessions that could make up a bachelor pad when we met each other. And from there, it was actually my dad that made that conversation easy, he was like, "Hey, so what do your parents do?" I was like, "Oh yeah, my dad writes this stuff on military financial independence and retiring early.", "What?", "Yeah, here's a copy of his book, you want to read it?" And he actually read it, and there was a couple of times where Mom and Dad in all their slow travels would find themselves sitting at the Space-A Terminal for military flights, where my husband was assigned.
So there was one time where I am underway in some undisclosed location in the Mediterranean, I get an email from my then-boyfriend saying, “By the way, I’m meeting your parents today.” And I’m like, “And I’m not there, oh no.”

Scott:
“WE’re talking about money.”

Doug:
It’s worth pointing out that he still married her.

Carol:
Yeah, right, despite my parents he still married me, despite me he still married me. So that was the thing, even though he got a later start, he dove headfirst into it because being from a poor background he understood the power of choice and the power of what money could do and give you options and a better lifestyle. So yeah, he didn’t exactly need to buy a car with a loan, but he paid it off very quickly, he started investing in his TSP. He opened up a Roth IRA and he started making his own brokerage accounts so that he could also make taxable contributions. So what’s funny is, I had a longer lead time, I started at age 14, but he’s already caught up to me, our portfolios are almost exactly 50/50 because he decided to just strap a rocket ship onto what he was doing and try to catch up to his spouse.

Scott:
So it sounds like you guys were completely aligned before getting married though, I think that’s just so important, I think, to being able to make the kind of progress you made early on in your career and give yourself that Lean FI option so early in life, that’s awesome.

Carol:
Thank you.

Mindy:
I love that he caught up to you and you had such a huge headstart, and you guys have said this a couple of times, or Carol has quoting Marge, we should really get Marge on the show too.

Doug:
Well, good luck.

Scott:
And Mr. Pittner, what’s your husband’s name?

Carol:
His name is KJ, there’s two Kens in the family, so he goes by Ken junior.

Mindy:
But she said it’s about choice, and I think a lot of people when they first hear about the concept of financial independence retire early, FIRE, they focus on the RE, “Oh, I can quit my job.” And I think it’s usually because they have a job that they don’t necessarily love, and I have had jobs that I don’t necessarily love when I was in that position, if I would have heard of this I would have been like, “Oh, I can’t wait to quit my job.” That’s not the focus, that shouldn’t be the focus, the focus should be on the financial independence. The freedom to make the voices because it isn’t just about quitting your job and sitting on the beach and surfing all day, like some surf bum.

Doug:
No, no, no, wait a minute, not so first, let’s back up a little bit here.

Scott:
Doug sits on the beach and surfs all day, for those of you listening wondering where that comment’s coming from, more or less, right?

Doug:
Two or three days a week at least, yes.

Mindy:
Doug taught me how to surf, Scott, did he teach you how to surf?

Scott:
He did teach me how to surf actually, yes.

Mindy:
Carol, did he teach you how to surf?

Carol:
We learned at the same time, so we actually hired someone else to teach us how to surf, but I mean, that was part of when Dad retired, that was the very first thing that happened, was we went out and we took surf lessons, and you talk about life after retirement, that was one of the big things we realized, “Oh, we could have done this a decade ago, we could have done this when Carol was learning how to swim, we would have had so many more years to enjoy surfing together.”

Doug:
She actually stood up on her board before I stood up on my board, so she learned to surf first.

Mindy:
Yeah, well how old were you Carol?

Carol:
About 10 years old, nine or 10, yeah.

Mindy:
Way smaller center of gravity.

Carol:
Oh yeah, the weight just takes you and shoots you, yeah, exactly.

Mindy:
Oh, surfing is rough, I watch those guys I’m like, “Man, that’s so easy.” And then you get on the board and you’re like, “That’s not easy at all.”

Carol:
“Got to keep paddling, just got to keep paddling.”

Mindy:
But you’ve mentioned the concept freedom multiple times and I just want to point out that that is what this is all about, it is about the freedom to choose what you want to do and right now you want to be a stay at home mom. That’s awesome, I was a stay at home mom for eight years, I think it’s an awesome choice, and after a while, that’s not what you want to do anymore. Or maybe it is, my mom was a stay at home mom and she never went back to work … Well, okay, that’s not important. But my mom didn’t have a job my whole life because they were frugal, because they had the savings in place. They made the choices, my dad worked and my mom didn’t, and they were able to do that because of the choices that they made.
Teaching your kids this, Carol could go and become little miss spendy pants if she wants to, that’s her choice, that is her freedom to choose, but if you don’t give your kids the financial foundation, they’re never going to have that opportunity to make these choices to be a stay at home, to be miss spendy pants, to be miss surf bum, I almost said ski bum.

Doug:
You also have to start learning those skills early, you might as well start at a young age with a little bit of money and make a lot of mistakes rather than start at a later age, in high school, or after high school and in your first job making big mistakes with big amounts of money.

Scott:
Well, I just think it’s amazing the parallel stories here, the overlap, the freedom and how accelerated, Carol, your journey was able to be in contrast to yours, Doug, which is something I’m sure you were really hoping for, to a certain extent, when you were raising Carol, maybe, I don’t know. But it sounds like that was very easy, smooth, there was no trouble at all, you instilled the lessons, they hit the first time, and we moved on and now we’re going to teach it to the next generation, is that correct?

Doug:
Well, I’ll back up a bit here, you just want your kids to be happy. You want your kids to find something they enjoy doing, that they think is challenging, fulfilling, and sometimes it has absolutely nothing to do with your lifestyle or what you think is important. But you want them to make their choices and be happy on their own terms, and I would say that raising a financially savvy kid for financial independence starts when they see the financially independent lifestyle of their parents and grow up in that environment and they’re keenly aware of the benefits of having choices. But Carol, could you tell the story of the Taurus and the longboard?

Carol:
I can. So, Dad has retired, I am about 10 years old, I am going into middle school, and for the first time, I had to bus across the town to get to the school because it’s on the other side of the district. And the place where the bus stopped was in the neighborhood, was also the one corner that everybody had to turn out of to be able to get on the highway on their way to work or to wherever they were going for the day. So I would be sitting on the wall with my friends, we’re waiting for the bus to come and here comes this familiar green Taurus with a surfboard on top and they come, and he has to be at the stop sign, so he stops at the stop sign and he rolls down his window and honks his horn and says, “Have a good day at school, honey, I’m going to go surfing.” And I was just like, “You mean I could be doing that instead of being at school all day or being at work all day? I’ve got to get a job, I’ve got to get some money, I’ve got to figure out how to get this going so I can do what Dad just did to my own kids one day.”

Scott:
You’ve got to retire from school.

Doug:
The whole point there is that you can learn those skills at a young age and she was in an environment where she knew it was possible, I mean, how hard could it be? Her dad was financially independent, and it’s a very low bar to excel and aspire to, and growing up in that environment you learn all of those skills. Now, you’ll still make mistakes, you’ll still be at a point in your life where you’re going to spend your money on things that may be more important to you than to anybody else, and maybe you’re going to make a lot of spending mistakes as you go. But you’ve been raised with a lot of skills that in the longterm will pay off and you’ll eventually return to those roots and recover and make progress.

Scott:
Well, I obviously, have no experience with any of this kind of stuff, and am learning so much from this, how would you begin, you two, presenting how a parent can go about addressing all the things you said, making sure that happiness is the first concept, but that money does allow choice, those types of things. How does a parent do that in a constructive, positive way and what have you guys learned along the way that could be helpful to share there?

Doug:
Well, it didn’t start out like we had this master plan with milestones marked off on a grid and a whole plan for the future. Instead, we just knew that we had to stay ahead of our daughter, this kid was constantly in our faces wanting to learn stuff and do things and we knew that when you’re raising a baby that you’re supposed to talk to them and help them develop their language skills. Now, she was babbling a lot, but she still hadn’t started forming words, so we would talk through everything we were doing and most of my conversations I remember were at the grocery store where we would talk about the food we were buying and making the choices on what food we wanted and, “We had enough money to buy the food we needed, and we like to buy this amount of food so we have this much money for food, and we could have bought that food over there but we didn’t want to spend the money that way.” And it was all about choices, and then you take somebody to a garage sale, and they see the same process going in.
And this time, maybe they have some quarters or a dollar of their own and they get to make a choice, and at a very early age they learn about buying one special thing, you have just enough money to buy something but not everything. So you have to make those choices, and that’s the whole idea is to start out with small sums of money and make those choices. We learned, later on, there’s a financial author, his name is David Owen, he wrote a book called The First National Bank of Dad, and in there he talks about how mentally, the parents have to get used to the kids making mistakes with money and his analogy is you give your kid a 20 dollar bill, they light it on fire, they run around at backyard waving it in the air until it’s all burned up and that’s how they learn how to manage their money. They’re going to keep making those mistakes over and over and over again, hopefully not with a 20 dollar bill every time.
But it’s a teachable moment, and so again, you’re talking to your kids, “How did you feel when you were doing that? How did you feel when you bought that toy? Do you still play with it? Did it live up to the commercial? What about your other friends, are they still playing with their toys? If you were going to save your money, would you buy that toy again?” And you just keep having those conversations, and talking through your feelings and talking about how much money you have and how long it would take to save up for the next big purchase. It’s just a continuing conversation and many times, money comes up because that’s how you negotiate your choices, is with the amount of money that you earn or save or invest. And the distinction is you’re teaching your kids to manage their money first, once they learn to manage the money, then maybe they’re ready to start saving and investing.
But at six years old, if you try to tell them that they’re going to save everything that they get for birthdays and holidays and save it for college, to a six-year-old, college is two lifetimes away and nobody will save money for that long. And when you’re a kid and your parents want to confiscate your money for this thing called the college fund, clearly, the best tactic kid has is to spend all that money and get rid of it all on the things they want to spend it on before mom and dad want to take it away from them. So we know now, focus on managing your money and then, later on, saving and investing.

Scott:
That’s really good perspective.

Carol:
Yeah, and at no point did Mom and Dad sit me down with a notebook and a pencil and say, “Okay, here’s what you need to know.” It was never a lecture, it was always something that was happening in passing, it was going about our day doing our normal things and understanding how money affects your day-to-day life. It wasn’t just the grocery store or it wasn’t just the garage sales, it was also, “Hey, did you hear about this bailout with the auto industry, what did you notice about that?” It was, “Hey, have you heard about this celebrity who has just gone bankrupt, what does that mean?” It was anything that you saw that had somewhat of a relationship to money.

Mindy:
Okay, as you guys are telling how Doug did it, I want to hear how you felt about this, you said it wasn’t a lecture and I’m like, “Oh yeah, I lecture my kids, I tell them they can’t spend their money on that instead of allowing them to make their mistakes.” Because I can see what a bad idea that is, that’s really hard for me, I’m kind of bossy and that’s really hard for me to pull back and let her make these mistakes. I’m trying to think what my kid said she wanted to buy, I’m like in my head I didn’t say this to her, but in my head, I’m like, “That’s the dumbest thing you could spend your money on, why would you do that?”

Doug:
I will point out that when you’re just starting out in the military, everybody has to train somebody in the military and you have to get trained, and everybody knows that they give you just enough sandbox to work in when you’re learning to be able to do things without actually hurting anybody or damaging too much equipment. So by the time we started our family, we’d been training sailors and we’d been getting trained for years, and so we were familiar with the idea of giving somebody enough room to go out there and learn to do stuff, and maybe make some mistakes that weren’t fatal mistakes and then scale it from there. So we were quite comfortable with seeing the mistake right away, seeing the big problem coming right away, but letting the train wreck continue until everything went off the rails because that’s when the teachable moment happens, that’s when learning occurs. Then that’s your chance to talk about feelings and choices and what you would do differently the next time.

Carol:
And it was never something that set me up for the defense, Mom and Dad never said, “Are you sure you want to buy that?” What they would say is, “Are you sure you want to buy that? You can also do things like save it for next time, you can save it for the ice cream truck, you can save it for the pencil vending machine.” It wasn’t just the hard stop, it was also, “Here’s all these other opportunities that you’ll have and all your other choices that you’ll have if you weren’t to spend that money now.” And I’ll say, “No, I’ve got this, I want this.” $50 later and the Pokemon cards that I’m holding in my lap and I’m like, “Oh, but now I can’t get ice cream.” And it took me that time to get there, it took me that time to actually spend the money and get stuff in my hands and realize that the allure has faded off and now I’m just stuck with paper and I can’t enjoy ice cream.

Doug:
“How did that make you feel Carol? What would you do differently the next time?”

Carol:
“Yeah, I don’t think I’m going to spend money on Pokemon cards next time, I think next time I’m going to save.” But you see how natural that is? It’s taking out that lecture and it’s making it into a conversation where you let the kids figure out how to get there. Now, not every kid’s going to do it right away, I bought maybe some 200 Pokemon cards, and then I bought maybe some 100 Yu-Gi-Oh! cards before I figured this all out. But that conversation came up again, and again, and again, and so it got to the point where you start parrying the shots, when Mom and Dad say, “Are you sure?” I’m like, “I know I want to buy this because if I buy this now, I’ve been saving this money for six months and this is actually something I want. The next thing that I want is going to take me a year to save for and I’ve got to give myself something now.” And that was just the way that I grew as a kid.

Mindy:
Okay, that’s actually really helpful because I feel like I should know what I’m doing, I feel like I’m a good mom.

Carol:
We’ve all been there.

Scott:
I’ve heard it’s so easy, so I’m looking forward to it.

Mindy:
It is, 100%, Scott, super easy, you’re just going to be a pro from day one. But I do feel like I know what I’m doing and when it comes to money, I have figured it out adult-wise. I hope that I can show adults how to manage their money, but I feel like kind of a massive failure when it comes to my kids. The one time my kid came to me and said, “Mom, if we find this at a thrift store or a garage sale, can we buy it?” I was like, “Yes, I did it right.” And then the next day they’re in the store asking for all these things and I’m like, “No, we’re not going to buy that, that’s just crap.”

Carol:
Two steps forward, one step back, yeah.

Mindy:
Exactly, exactly all the time. But reading the book was really, really helpful to see that you have to give them rope to hang themselves so that they do it and then you can teach them and that’s really hard for a control freak to come to terms with.

Doug:
There are lots of books out there that will tell you about child development, there are lots of books out there that will give you the guidelines for parenting, there’s thousands of those books out there and we wanted to write a book that just tells the stories around the kitchen table format of how we came up with these ideas to teach our daughter to manage money and how she perceived it when she was a kid, and then how she sees it now as an adult. And those are specific tactics that parents can try with their kids, now, you’re going to modify it for your family situation, but you can try these things to get your kids interested in managing their money. Then, later on, you can start building their financial incentives to save and invest, and it all compounds from there because you’re going to learn these things eventually in your life, anyway, probably by the time you’re 30 years old, and wouldn’t it be so much better if you learned it when you were five and 10, and 15 years old, instead of 30 years old?

Carol:
Yeah, I think there’s this common misconception that because money is an “adult” thing, you can’t open an investment account until you’re 18, you can’t start a TSP until you get to your first job, I think there’s this misunderstanding that you have to be an adult to start learning about money. But the reality is that’s not the case for other things that you have to be an adult for, you start learning about hygiene from a very young age so that when you are an adult you can actually be a clean person. You start learning to look both ways to cross the street when you’re a kid so you can actually survive into adulthood, money is such an integral part of our day-to-day life, but for some reason, we have a culture where we don’t teach our kids. And we don’t teach them while they can still make mistakes and they can learn to look both ways before they get his by a debt truck.

Scott:
And I'm listening to this, I hear the book mentioned, but we haven't formally introduced that yet, tell us about the book title, and what readers can expect?

Carol:
So the book is Raising your Money-Savvy Family for Next Generation Financial Independence, and Dad kind of went into it, what it is is Dad will start the narrative about some idea that he and Mom figured out and then I'll put in my own two cents about what actually happened. And a lot of times you'll see the stories match up, that it actually makes sense, "Here's the adult perceptive, here's the id perspective." There are other times where you realize, "Whoa, that did not happen the way the parents wanted it to go." There's a good story where Mom and Dad would give me books, Your Money or Your Life, The Millionaire Nextdoor, Richest Man in Babylon, Rich Dad, Poor Dad, and I would put those books on my shelf and I would stare at the-

Doug:
It’s amazing, you can tell me all the titles now.

Carol:
Yeah, I can put the book on my shelf, but I never read it, and at the same time Mom and Dad would find these little articles on CNBC, for example, or it would be a Suze Orman thing, and I would be able to take those articles and I would have them read in 15 minutes, and then I would go back and say, “Hey Dad, in this article what about …” And so on, and so forth. A lot of those books I didn’t start reading until about six or seven months ago, I’m not going to lie, but I didn’t need those books, I had FI and then I came back and read the books.

Mindy:
I think getting somebody to read a book can be difficult, I mean, that’s a whole book whereas the article is five or 10 minutes, that’s interesting, now I’ve got to find articles tailored to my 10 and 13-year-old.

Doug:
Or you have them in the car listening to podcasts, or you show them a video on YouTube and it’s so much better since the web has brought all that content to use in bite-sized chunks instead of having to land some 300-page book on their table.

Scott:
Yeah, well, it sounds like the book is for someone who’s got a family, a next-generation that they’re trying to raise and corporate, productive, positive discussions about money and its place in life over the course of their development, their childhood and teenage years?

Doug:
And part of it too is when you start that family if you’re an adult starting your family, that might be the first time in your life where you ever actually had to think about your finances and straighten out your own act because now you’re raising a family, and you don’t want them to make your mistakes. You don’t want them to follow in your footsteps of ignorance, and you’re going to try to do things better for this next generation. So that’s what the book is for, is helping you start those conversations very early, while they’re still at home with people they trust and they love, where they can make mistakes in a safe place.

Carol:
And the flip side of that is that we also know there’s going to be readers where they just didn’t see this in time, their kids are teenagers, their kids are growing up in their tweens and they didn’t have a roadmap to really work with. They’ve been doing the parent thing, and they’ve been holding on for their dear life for the parent thing, but there wasn’t anything they could work with at the time, or that they had the bandwidth to work with. So when it came to writing the book, we told the story chronologically, but we also tried to remove as much age as possible, we tried to stay away from saying, “By age eight you should be doing this.” And we said, “No, it’s going to be different for every person.” Some people are going to catch onto saving at age six, some people aren’t going to catch on until age 16, so rather than try to figure out what age you should be doing it, we’ll let the families figure that part out.

Scott:
Nice. So when does the book come out?

Carol:
Pre-order is now, so as you’re hearing this episode, pre-orders are available, and the book is slated to come out on September 8, 2020, assuming there’s no delay in printing, things like that.

Scott:
Awesome. Well, I think I’m a few pages in, I haven’t had a chance to completely read the book, unfortunately, prior to this. But I love the concept so far, I think it’s awesome, I think you guys are awesome, I just think what a wonderful and appropriate approach, it seems like you guys both have to this discussion. It’s so positive, and obviously, the freedom that you guys have been able to attain for both of yourselves early in life is just phenomenal, and yeah, I really appreciate and look forward to finishing it, thank you.

Mindy:
We want to know what you’re investing it, where are you planting your money so that it grows for your retirement, or actually, where have you planted your money so that it would grow for your retirement? And there’s no one right answer, but we all know that it will take forever to become a millionaire based solely on your W2 job. So, to improve our chances of success, we invest, we invest in stocks or bonds, or real estate, or other opportunities. Doug, let’s hit you first, where is your-

Doug:
I don’t want to color Carol’s answers, but I’m happy to go first.

Mindy:
Well, this is personal, you don’t share your money with Carol anymore, do you?

Doug:
Well, actually we do, as part of estate planning we make sure that she knows everything, we’ve opened up the books in the family, and in case Marge or I ever get to that point in our life where there’s this horrible surfing accident, or this horrible slow travel accident, we want Carol to be able to step right in and cover disability and take care of us. I mean, I hate to be the Debbie downer here, but that is one of the reasons that we have opened the books, so Carol knows all these answers, but I’m ready to go first if you want me to go first.

Mindy:
Go ahead.

Scott:
That was really good context, by the way, I think a lot of people need to take note of what you just said and learn from that, by the way, so thank you for sharing that.

Doug:
It’s easy to do estate planning for when you’re dead because you’re dead, but the challenge with estate planning should really be for disability when you can’t take care of your money anymore and there’s going to be somebody in your family that’s going to have to take over for you, and everybody thinks we’re really nice parents for training our daughter so well on handling money, and managing money and building wealth. But, it’s also about us, one day she’s going to be doing it for us, so I’m glad she knows how. All right, let’s get back to the lighter side of this, what am I investing in? Mindy, it’s all in cryptocurrency.

Mindy:
I knew it, I knew it, 100% Bitcoin, okay, Carol? You 200% Bitcoin?

Carol:
Oh, god no, no, no, no, no, no, no, no, no, no, no, don’t ever do Bitcoin.

Doug:
When we reached financial independence, we were both still on active duty at the time in the 1990s and my wife and I had had a very aggressive investing portfolio, and we tried to stay 100% equities, I mean, we had a small emergency fund, but our investments were all in equities. Since then, in the last 18 years of retirement, Hawaii real estate has been doing really well. So we started our retirement in the year 2002 with maybe 10% of our net worth in real estate and now it's grown up to be about 25% of our net worth is in real estate. But the rest of the money that we have invested is greater than 90% in equities, I think today it's 96%. It's in a total stock market index fund, but we are 96% invested in equities other than real estate.

Scott:
Awesome, love it.

Mindy:
Okay, and in terms of your annual spending for the year, what does your real estate kick-off?

Doug:
Our real estate is underperforming, I should point that outright from the beginning, real estate is underperforming, Hawaii real estate does not match the 1% rule thumb rule, in fact, around here it's the 0.4% thumb rule. But we do have a property that we have been keeping for the last 20 years, and we've been landlords, and we've decided we're at the point where we've had enough of landlording, that's a discussion that comes up every couple of months in the Nordman household is, "How much longer do we want to be landlords?" And it's an evolving discussion, one of the things that brings Marge great comfort is knowing that she's got this other home that we're landlords of, that would be a perfect place for her to age in place, and this is many years from now after I die, she would be able to move back into this place. It's single level, very walkable neighborhood, it's close to the park, close to the grocery store, it is a very easy place to live and age in place. Of course, now I'd probably have to be a landlord for another 30 years to let her get to the point where she can move back into that.
That's the debate, and I would say that if you're coming to Hawaii to live or be stationed here in the military, you can make money investing in real estate in Hawaii, but the only people doing that are the ones who are either house hacking with roommates. Somebody should write a book about that house hacking stuff, they'd be set for life. But the other people who are making money in real estate in Hawaii are people that are doing significant rehabs, take a house down to the studs and start over. It's a great location and they make it into a great house.

Scott:
Well, I just want to chime in, I think the cash flow is very difficult to come by in Hawaii generally, but the fact that you mentioned that it used to be 10% of your portfolio and it’s not 25% of your portfolio, indicates directionally to me that it has over-performed over that whole period because of appreciation, which of course, is a very uncomfortable thing to rely on or move your strategy around but-

Doug:
Yeah, I would not rely on that here, but over the 30 years that we've owned this home, it has risen about two to two and a half percent per year, a little better than inflation, but keeping up with inflation.

Scott:
Got it, well, awesome. And I just want to chime in real quick about how simple your allocation in terms of your investing approach, and that’s a theme that we hear over and over, and over again from folks who have successfully gotten to FI, there’s nothing complex there. There’s real estate, and then 96% stock market index funds, I mean, come on-

Doug:
I will point out, I came there from a circle journey of going through every other type of investing out there. I wanted to explore and find out if I was a brilliant investor, but every year that I get older I trade less and I’m more passive.

Scott:
Love it.

Mindy:
Yep, and then one last question, Doug, and then we’ll move over to Carol. In terms of your annual spending, how much do you have in cash, one years spending, five years spending, a month of spending?

Doug:
For the first 10 years of financial independence, we used to keep two years of spending in cash, and we did our research and we realized that that’s enough to get through a bear market without having to start biting into the equities portion of your portfolio. The sequence of returns risk for that first 10 years starts to dissipate after that and the other thing that happens is your portfolio keeps growing when you’re working through that first decade of financial independence. So we stopped doing that about 10, 12 years in, as we climbed out of the great recession in 2012, 2013, we stopped keeping that two years of expenses in cash. So today, we’ve got enough money for the next month’s spending and the next couple months spending, but we don’t keep cash on hand unless we know that we have a large bill coming up. Frankly, if I have a large bill coming up, I’m probably going to find a rewards credit card that I’m going to spend on that bill and then pay it off the next month with cash.

Mindy:
Okay. Okay, Carol, same questions for you, where did you plant your money to become Lean FI, and then after that, in terms of annual spending, how much do you have in cash?

Carol:
So when it comes to Lean FI and all of our investments like dad said, I am a passive investor, I can’t do the active thing, I don’t have time to do real estate investing. There are military families out there that do real estate investing, all the kudos to them, it’s not my lifestyle, can’t do it right now. So most of my stuff is in mutual funds-

Doug:
We’ll talk later.

Carol:
We’ll talk later, yes. But that’s the things I most of my stuff is in mutual funds, most of my husband’s stuff is also in mutual funds, and I know that there’s good things like Betterment and Fundrise and other sort of organizations that will help you diversify into real estate and into microloans and so forth. But for now, we’re keeping it simple, we’re just keeping it in a brokerage account and multiple ETFs and multiple mutual funds and it goes up and down with the market. So on the flip side, when it comes to what we keep in our cash reserves, we do it a little bit differently, most people say that you should have eight to 12 months of cash reserves, six to 12 months. We figured out that that’s not really what we need, what we really needed was a set of plane tickets to the most distant relative, a brand new car, a new used car, brand new to us in case something went wrong. And we also just needed a couple of months because a lot of people say, “Oh, the military paycheck is a steady paycheck.”
But depending on how Congress is doing this year, Congress hasn’t always figured out how to get the pay out in time, and so it’s been easier to keep numbers for those big three, rather than trying to figure out what’s going to happen over the next year.

Scott:
Awesome. So, when you say mutual funds, is that index fund investing largely, or is there something else you’re doing there?

Carol:
I have to admit, I am a passive enough investor that I set it six years ago, and I haven’t revisited it, so I should probably do that. It’s the kind of thing where I listen to folks like Dad in the FI community and they said, “Hey, you should try these for these reasons.” And about once a decade is the optimal time and to go back and to look at everything and to say, “Okay, now you’re 30 years old, now you’re 40 years old, what should I change things to?” So in the back of my head, I have the tickers going, but I couldn’t exactly tell you why that ticker is this particular investment right now. I’d have to go back in and take a look at everything.

Doug:
I remember you were getting pretty low expense ratios in there and they were pretty much staying invested fully in the market, they weren’t trying to be actively managed and jumping in and out.

Carol:
Right, the only thing, I think GSP requires 1% has to be in government bonds or 3% has to be in government bonds, that’s the one thing that I just can’t change that, I have to do that little bit of bond investment.

Scott:
Got it, thank you.

Mindy:
That’s okay, that little bits enough.

Doug:
That’s right.

Mindy:
Okay. It is now time for our famous four, these are the same four questions that we ask of all of our guests, Doug went first last time, so Carol will go first this time. Carol, what is your favorite finance book?

Carol:
Oh, my favorite finance book. So this one is a new one, it came out in November od 2019, it is very new and it’s written by the famous con artist turned FBI investigator, Frank Abagnale, you know from Catch Me if You Can?

Mindy:
Yes.

Carol:
He wrote a new book called Scam Me if You Can, and it’s a great book, it talks about credit card scams and small business scams, and internet scams and all kinds of different frauds that could be inflicted on you to try to get your money out of your hands and it’s a great book, I highly recommend it.

Scott:
We’re changing the name of the financial scan to the financial scam going forward.

Doug:
There you go.

Scott:
So credit to Doug here for saying that in pre-recording.

Mindy:
Doug, what’s your favorite finance book?

Doug:
I’m going to go with a classic, Your Money or Your Life, that book made the biggest change in our lives, and even today it’s still something that I come back to once in a while.

Mindy:
Oh, Vicky is amazing.

Doug:
Mm-hmm (affirmative).

Scott:
Awesome. What was your biggest money mistake?

Carol:
Oh, I don’t necessarily call it a mistake, I would call it something that we’re still trying to figure out, and that’s how much insurance do you actually need? Health insurance, you definitely need that, car insurance, you definitely need that, renters/home insurance, you definitely need that. But then there’s the individual situations like we have life insurance in the military but what happens if we had some kind of accident off duty? We’re going to be making a cross country road trip, do we need to bump up the insurance a little bit to be able to cover the battery failing in the middle of Arizona? Things like that, and so it’s not necessarily a mistake as much as it’s a very crooked path stumbling over, “Well, we need more now, we need less here.” And just trying to figure out what the right number is.

Scott:
Awesome.

Doug:
I think everybody goes through that.

Mindy:
Yeah, I have discovered that the higher your deductible is, it considerably lowers your premium, just trying to think of the word, so if you can save or if you have access to, I think my car insurance is like a $5000 deductible or something like that, if you have access to $5000 easily, raise it up to that. If you don’t have access to $5000 easily, then clearly don’t do that, but when you are betting that you’re not going to get into a car accident that’s your fault, and I’m not because I’m awesome, except the last accident I was in was my fault.

Doug:
Everybody’s about average.

Mindy:
When you’re betting that you’re not going to do that, that’s a great way to save. I have saved money on my premiums for years, for decades because I do have access to that $5000, and when I was trying to change it with the insurance company they’re like, “Oh, are you sure you want to raise it that much?”, “Yeah, I do.”, “That means that we’re not going to cover the-“, “I know what it means. I really do want it up that high, it’s okay.” I think it’s funny that a lot of people will question when you try to make alternative choices with your money.

Doug:
Yes.

Scott:
Yeah, I think it kind of goes with that cash emergency reserve, if you have a little bit of cash in an emergency reserve, maybe you’re starting to save at that 20, 30 40% rate or higher, that really I think when you can begin to, as a rule, but not always, think about that higher deductible type of insurance because often the trade-off between that lower premium and higher deductible, it can be worthwhile, but that’s kind of a general framework that I apply to my insurance. But everyone has to then obviously apply that to their own situation and think through it themselves. Well great, what about you Doug?

Doug:
All of our biggest money mistakes have been ironically with real estate, and when we had first moved to Hawaii in 1989, we bought a house and at the time we bought it, it was because that’s what you did, you bought a house at every duty station because real estate always goes up. And the year after we bought that house, the market was not only high, it went even higher, it went from irrational exuberance to plain nuts. And we found a home that we really wanted to buy up on the north shore and spent money on the initial purchase, and to show our commitment to purchasing this house to the sellers, we put down $5000 in 1990, as the down payment money, the initial payment on the contract, at the time, it seemed like to us, the right thing to do. Now, commuting to work from Hale?iwa down to Pearl Harbor is one hour each way, we hadn’t started a family yet, it really hadn’t sunk in that I was going to be underway on a submarine for about half of that tour, the house we would have had to rent out the basement and we would have had to essentially spend every penny we had for the down payment, let alone for the mortgage.
We couldn’t afford it, we didn’t appreciate this at the time because real estate always goes up, we knew we were going to be on the rocket ship to millions, as it turned out, we couldn’t get the loan and we had no plan B, and we lost the $5000. Now, in retrospect, it’s the best lesson we ever learned with real estate, it’s when you start becoming more conservative with multiple plans or alternate financing, or some other way to make that work out. But we had never in our life before, ever struggled to actually buy a place and been unable to get the loan, that was the first time that we’d been turned down for a loan because we never tried to borrow that much money before.

Scott:
Well, it sounds like this mistake saved you a lot of money or a lot of time?

Doug:
In the long run yes, yes, I would have missed out on a lot of surfing, but it did save us a lot of money in the long run.

Scott:
Yep.

Mindy:
But that $5000, losing it in 1990, I bet, was not the best-

Doug:
Oh, that hurt, that hurt a lot, yep.

Mindy:
… best point in your life, yeah. Yeah, well that’s good, I’m glad you lost $5000, Doug, you learned your lesson.

Doug:
I did, and at the time it was very much fun, but you’re right, now I’m glad we did lose that money.

Mindy:
I lost $13,000 on a home sale once when I sold it a year after I bought it for the exact same amount that I sold it for, but then I had to pay real state commissions, and all of that, it was so not the house for me. This was eight years ago, I knew what I was doing, I had been investing in real estate forever and I’m like, “I am happy to be done with this house.” We lived in that house for two weeks and looked at each other and were like, “Do you want to move?” It was just-

Doug:
That bad.

Mindy:
Everything about it, the house was nice, the neighborhood was filled with people who are anti-FI, and it was just the most opposite of whatever we wanted and I was happy to get rid of it.

Scott:
We can talk about them here, they’re not listening anyways.

Mindy:
Yeah, exactly, they’re not listening, but I’m not going to name them by name, Bob, Laurie, Tom. Okay, Carol, what is your best piece of advice for people who are just starting out?

Carol:
Give yourself a little slack, you don’t have to know everything out of the starting gate, you don’t have to get it right this first or second, or third, or fourth times, just start somewhere. I mean, if you’ve got $5 in your wallet and it’s just sitting in your wallet, take it out of your wallet and go put it in a mutual fund and just start there. You will have time later to optimize things, to move things into better investments, to figure out exactly what you want to do. You’ve just got to take that first step, and the journey of a thousand miles starts with one step, just start there.

Mindy:
The journey of a million dollars starts with one dollar.

Carol:
Exactly.

Mindy:
I love it, I love it. Doug?

Doug:
Well, it's very basic but it's the one I've been giving out for 15 years now, and that's track your spending. Just track it however you want to track it, pencil and paper, spreadsheet, computer program, Excel, Quicken, Mint, Personal Capital, I don't care, whatever works for you and whatever is sustainable for you to spend the time on and keep tracking it that way. Once you track your spending, everything else falls into place because now you'll be able to figure out where you think you're wasting your money, you'll spend less of that, and where you find things that are valuable to you for you to spend your money on and you'll be willing to work for that. And if you don't do that tracking upfront, then you don't have that awareness and you don't make that progress.

Mindy:
I love that, if you’re willing to work for it, it’s work spending money on.

Doug:
Well, at some point you’re going to look at that and you’re going to say, “Why am I working so hard for whatever this thing is, whatever this goal is? It seemed like a great idea a year ago or five years ago, and now I’m a different person and I’m going to have different goals.”

Scott:
Mm-hmm (affirmative). All right, Doug toughest question of the famous four, what is your favorite joke to tell at parties?

Doug:
Carol’s cycling through all the profane-

Carol:
Dad jokes, yes.

Doug:
Well, you just took my answer.

Scott:
This is what I’m looking forward to, this is the easy part for me.

Doug:
That’s right, that’s what it is with me is dad jokes and my favorite dad joke is when does a joke become a dad joke? And the answer is when it’s a parent.

Scott:
Oh, excellent pun, love it.

Doug:
Mm-hmm (affirmative).

Carol:
I’m not that witty when it comes to joking, this is a joke I heard, I was probably 10 or 15, I don’t even remember when I heard it, and it’s actually a riddle, a peanut sat on a railroad track, thinking it was all a flutter, when around the corner came a railroad train, toot, toot, peanut butter.

Scott:
Love it, that’s awesome.

Doug:
You’re the first singing guest we’ve had on BiggerPockets.

Carol:
Got to do something different.

Scott:
Quick plug here by the way, I found an Instagram account that changes my life it’s @dadsaysjokes, it’s fantastic, so go on if you’re interested.

Doug:
Thank you.

Mindy:
I’m so sorry, Mindy.

Doug:
Thank you, Scott.

Mindy:
Yes, yes, thank you so much for that amazing … I wanted to join the Navy, but that ship has sailed.

Doug:
Uh-huh (affirmative) very good, very good, well said.

Carol:
Okay, that was good.

Scott:
All right, where can people find out more about you guys?

Doug:
Carol?

Carol:
So we’re working on a website called childfire.com, you know, child and fire .com, it’s still under construction, haven’t quite 100% brought it upline, but there is a contact us box on the website as well. And as always, you can reach out to us on Facebook, I use my own name on Facebook and so does dad, and together we put together a Facebook profile of the book.

Scott:
Wonderful, and the book is available on Amazon, I imagine?

Carol:
It’s available on Amazon, I think there’s a Barnes and Noble running around as well, and of course, our publishing group is Choose FI, so if you go to the Choose FI website, you’ll be able to track down the link from there as well.

Scott:
Awesome.

Mindy:
Awesome, awesome.

Doug:
And the audiobook will come out a week or two after the release on Amazon, Amazon always delays the audiobook by a little bit after the rest of the editions come out.

Carol:
Mm-hmm (affirmative).

Scott:
We will link to all of this in the show notes, and any additional ways folks can find out more about you guys as well, and those will be at biggerpockets.com/moneyshow136 is where you’ll be able to find those notes if you’re listening.

Mindy:
Okay, Doug and Carol, this was fantastic, this is really, really helpful and I’m thankful that you wrote this book because I know that I am going to learn a lot from it, I already have learned a lot from it as I’m reading through I’m like, “Oh, look at all the things that I am doing wrong.” So thank you, Doug, for being a better dad than I am a mom when it comes to teaching my children about money because I need some help.

Doug:
You’re getting four times as much experiences as we are, you’ve only got two kids instead of our one, but they go up by at least a square factor.

Mindy:
Okay, that was Doug and Carol, Scott, what did you think?

Scott:
Oh, I thought it was fantastic, oh, just for everyone listening sake, I grew up in Maryland near the Naval Academy and I’ve always been fascinated and had a lot of admiration for the Navy and so I just always love to chat about these things. It’s wonderful to see their service, I sat down with Doug one of the first times I met him and asked him about his career in the Navy and all that kind of stuff, I have a fascination with submarines, he’s got all that. So always enjoy a conversation with Doug, not to mention his genius in paving the way in a lot of ways for financial independence from a military perspective. I mean, he kind of figured out a lot of this stuff and has been living the benefits of it for a very long time here prior to maybe the FIRE movement kind of, I don’t know what officially means, but officially gaining traction. So always love listening to him, and then Carol and Doug just have such a dynamic and shared, I think, such powerful lessons, I loved the show, it was wonderful.

Mindy:
You’re right. I love the show, it was a great show and the book that they wrote together, the book that’s coming out very soon has a very similar dynamic, Doug tells his point of view, Carol tells her point of view, and seeing how these lessons were given and received and the mindset behind what Carol is hearing when she’s hearing her dad tell her these things is really, really helpful for this mom who is kind of struggling with the whole, “How do I teach my kids about money?” Thing. I mean, yeah, we don’t buy a lot of stuff, but teaching them the lessons behind it is something that I have struggled with and there’s a lot of things in their book that has really opened up what I’m looking for. And I can’t wait to see down and read it with my kids and share it with my husband, and really just go through it and take the lessons that Doug learned, and teach my children about money. And Scott, like you said so many times, kids are so easy, it’s going to be so easy for you to teach your kids about money, your future kids.
You can write to Scott, [email protected], and tell him how easy it is to raise kids and how great they are in every single way.

Scott:
And always, I say that tongue in cheek, I know that I don’t know what I don’t know, if that can be possible to all those knows in a row. But yes, you can reach out there or you can share those lessons with me in our BiggerPockets Money Facebook group where we all like to hang out and nerd out about financial independence. So as always, that’s a resource for you, just type in BiggerPockets Money in Facebook in the search bar and you’ll find our group no problem and we’d love to discuss it., just know that if you try to spam or promote in the group, Mindy will kick you out within two seconds, so don’t do that.

Mindy:
Yes, it is a group to talk about money, talk about the problems that you’re facing with money, talk about your successes, maybe you have an issue with your child not getting a concept, we’ve got a lot of parents in there that can help you with your problem. If you’ve got a concept that you’re having problems with that isn’t related to kids, throw it in there too because there’s a lot of people, I think we’re up to 5000 people in our group, Scott, 5000 money nerds.

Scott:
Yeah, it’s pretty exciting and fun, I hang out there a little bit too much during the day I think, now.

Mindy:
No, now it’s your job to hang out there.

Scott:
I guess that’s true, I guess I can be on Facebook all day, all right. Well, please join us there, we love the interaction and discussion, I think it’s really exciting and fun and it’s another resource for you if you’re interested in hanging around with like-minded people on this journey.

Mindy:
Yeah, having like-minded people to bounce ideas off of is really, really, really helpful, especially when you're just getting started. But even at the end of the journey, it's nice to be able to share what you've learned. Scott, should we get out of here?

Scott:
Let’s do it, let’s have an exit without parallel, what have you got?

Mindy:
Along those lines Scott, he’s Scott Trench, I said he is Scott Jensen. I am Mindy Jensen, he’s Scott Trench, and we wish you fair winds and following seas, which is a naval saying if you’re not in the Navy and don’t know that. Okay, goodbye.

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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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