BiggerPockets Money Podcast

BiggerPockets Money Podcast 145: From Hedge Fund Manager to Smart Money Mama with Chelsea Brennan

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Chelsea Brennan was a hedge fund manager for several years – until her second pregnancy when she ended up in the hospital with sever complications brought on by the stress and emotional toll her job took on her.

She and her husband looked over their savings and investments, and decided that she’d leave her job in order to focus on her health and her kids.

Her baby was born healthy, but their income went from six figures to zero figures, and she needed a way to bring some money in.

She looked back on her love of teaching, and decided to start a website devoted to teaching women – and moms specifically – how to handle their money.

Chelsea is truly passionate about teaching the power of financial independence and being in control of your life. Are you struggling with your finances? This episode is a cannot miss!

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 145, where we interview Chelsea Brandon from Money Smart Mamas and get her story of leaving a lucrative career to start her own business and how being financially savvy helped her realize her dreams.

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Chelsea:
But I think it’s really going back and thinking about your relationship with money before you dive in and sometimes… oftentimes especially when people start budgeting and start setting these goals, they’ll tell me like, “Well, I can but every time I try to budget, I get stuck or it doesn’t work, or I just can’t budget.” There’s probably some roadblock in there that you’re setting up in your brain that is keeping you from moving forward. So I think the first thing is really thinking about your relationship with money.

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

Scott:
Oh, thank you as always for the gleaming and glowing intros Mindy there, just fantastic every time.

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 path, you can put yourself on the road to early financial freedom and get money out of the way so you can live your best life.

Scott:
That's right. Whether you want to retire early from your high-paying Wall Street job, you could travel the world, go on to make big time investments in assets like real estate or just start your own business, we'll help you build a position capable of launching yourself towards those dreams.

Mindy:
Scott, I’m so excited to have Chelsea on this show today. She left a lucrative career as a hedge fund investor to start a passion project because she wanted to make a mark on the world. Chelsea is the founder of Money Smart Mamas which is an online platform that gives women support and guidance as they navigate all aspects of their money, helping them overcome emotional blocks and identify what they want most [inaudible 00:01:50]create healthy money habits, not only for themselves but for their kids too.

Scott:
Yeah. I found Chelsea super fascinating. She has had a wonderful career, made a lot of money, is super smart. [inaudible 00:02:01]clear analyst’s extraordinaire here and yet she was able to leave that world of investment banking and distressed debt and hedge funds to start Money Smart Mama and she… you can tell is applying that incredible intelligence and perspective that she’s gathered over the years, just helping people master their money journeys. Helping mums in particular master their money journeys. And it’s just a wonderful story, it’s got the analyst bit and the emotional bit and I couldn’t be more thrilled to bring her on today.

Mindy:
Yeah. She’s like a combination of left brain and right brain. She gets the emotional side of it but she also has this crazy analytical side. It’s an awesome show and I know that everybody listening is going to have a really good time listening to it. Chelsea Brandon, welcome to the Mama Pockets Money Bigger… Welcome to the show.

Chelsea:
I’m so excited to be here. Thanks for having me, Mindy and Scott.

Mindy:
So tell me where your journey with money begins because I want to get to the part where you have a job because that’s fascinating to me. Oh, that sounded so mean. That’s like, “I want to get to the point where you finally get a job.” I don’t mean it like that. I want to talk about your job but first let’s talk about what led up to that job.

Chelsea:
Absolutely. Yeah. I was very lazy. Took me a long time to get a job. No. So my money journey starts way back when I was a kid. And so my dad had a business partner and… you know Rich Dad Poor Dad, the whole drama with that book, very much is actually similar to my actual life, where my dad had a business partner, they made the same amount of money. They handled money radically differently and so my dad was constantly spending all his money and kind of in debt and just not super responsible. Where his business partner was one of like the original Boglehead guys and he was telling me from like age 12, Vanguard investing, early retirement, all this stuff from early on. So he gifted me Benjamin Graham’s book when I was like 14 years old. I also had my uncle in my head, right? And wanting to earn money, and having this real [inaudible 00:03:53]… We’ll talk about later how I didn’t really recognize that I attributed wealth and money to self-worth and to my worthiness. And so I decided, “I’m going to go to Wall Street.”
And I never thought I was going to be there forever. My goal was to work there for like a first act career and then as much as I hadn't heard of true retiring early I was like, "40, 45, I'll leave and go do something else with more purpose." And so my first job out of college I was an equity analyst at Goldman Sachs. I was there for several years and then I went to Bain Capital which is a hedge fund that runs out of Boston and I managed a distressed debt book there for several years. So that's the beginning of my job journey Mindy. I got there as fast as I could.

Scott:
So what was your financial situation upon entering this investment banking and Bain Capital world? Did you have a lot of student debt or anything or what was the background there?

Chelsea:
So I didn’t have any student debt luckily, I was privileged enough my parents paid for my college education. I also graduated from college a year early to try to pay attention to that cost and so I was starting without student debt. Now I was moving to New York city so things were expensive but I always kept my expenses super low. So even the first year, I saved 50% of my income and then I met my husband the next year and we started dating. We actually, of all things, met on Craigslist and were roommates for a while before we got married. And so my savings rate continued to increase once we got married. And so we were always between 50 and 75% saving.

Scott:
Awesome. And so what did you do specifically? Give us a very quick review of your lifestyle, [inaudible 00:05:28]we can imply a little bit of high income with the Goldman Sachs and Bain career, but was there anything particularly exciting you did on the expense front or just kind of pretty reasonable for that level of income?

Chelsea:
It was just pretty reasonable. I mean, our hobbies were always low cost, right? We loved hiking, we loved biking. My husband was a yacht captain and so we’d go out on boats but like boats that he was working on so we didn’t have to own or maintain them. And so that was always great but no, we just didn’t have super high expenses. And one of the benefits [crosstalk 00:05:58]-

Scott:
Yacht hacking.

Chelsea:
What was that? Yacht hacking. Exactly.

Scott:
That’s amazing. Got to get into that.

Chelsea:
One of the benefits of that style of work, and benefits is a stretch word here, is that you work all the time. And so everybody saves. A lot of people save a lot of money because you’re literally at the office from 6:30 in the morning till 10:00 at night and so you’re not going out and doing anything except working. And even then, there’s benefits, right? Of like if you work those hours, they also buy you dinner and so you’re not buying dinner. And there’s a lot of stuff like that, that happens in that industry. But, no, we just kept a pretty frugal lifestyle.

Mindy:
Okay. So when you said you were at the office, were you talking about husband and his yacht office or you and your investment banker office?

Chelsea:
My investment banker office.

Mindy:
Okay. Okay. For some reason I was-

Chelsea:
The yacht office should be more fun but…

Mindy:
Yeah. That would be fun to be out there 6:00 to 10:00 but yeah, I think that’s really important to note. And just because you’re not an investment banker, doesn’t mean you can’t get a second job and always be working and never have time to spend money. [inaudible 00:07:03]but I think there’s a lot of people who are like, “Oh, well, she had it so easy because she was an investment banker making multiple six figures,” or seven figures or 12 figures or whatever investment bankers make.

Chelsea:
That was stretch. No.

Mindy:
But I also, when I was much younger, I was a administrative assistant, I was a waitress and I went to school. So I never had time to spend money. I was working or I was in school. I probably had a super high savings rate that I never tracked because nobody talked about financial independence 200 years ago. So I can hear people saying, “Oh well it’s…” dismissing the story, “Oh well, whatever. She was making a lot of money.” You can still do this by taking on a second job. You can not spend money because you’re working all the time and not just making a ton of money. And it’s still a great way to pay down your debt and save for the future. You can have a 50% savings rate no matter what the rate of money that you’re bringing in. If you’ve got a second job, put all of that money into a savings account or pay down your debt or invest or whatever.

Chelsea:
And I think too, that was not a lifestyle that I would want now as a parent, which is part of the change that we’ll talk about but at the time, I had close friends that I worked with. My son’s Godmother worked with me at Goldman. We had a good network there. It was not like it was miserable. Mostly we were seeing our friends and working and doing really intellectually stimulating, interesting work and so it was okay for me to be at the office all the time. I was not miserable early on until we started really thinking about a family.

Scott:
Could you briefly describe what investment banking is for those who don’t know?

Chelsea:
Yeah. So I actually… I can tell you what investment banking is. I was not an investment banker. So I was an equity analyst and so [crosstalk 00:08:50]my job, my first job was evaluating stocks. I specifically specialized in commodities and metals and mining. So I would look at those type of companies, set target prices for them and then pitch buy or sell recommendations to portfolio managers around the world. And so that was my first job and what was really cool about that job from an investing perspective is you learn so much about valuing stocks. Not just doing it yourself but you had to go debate with these portfolio managers managing billions of dollars, right? And they would challenge you especially if their investment position differed from what you were telling them to do. They would argue with you, not always kindly but you learned about how they thought about investing. How they thought about valuation. And so it was really interesting to learn deep about the industry but also to learn about investing in that way.
And then when I went to Bain, I was doing more hedge fund, distressed debt stuff. So we’re talking about risky companies, either high-yield companies or like facing bankruptcy. And so I was doing debt, still in the metals and mining and industrial spaces at that point. Same things, valuing companies and then actually the difference between research and that job was, I was actively investing money. And so when I left Bain, I had a book of 1.4 billion that I invested in the industrial and metals and mining space.

Mindy:
Okay. So what’s your hot stock tip?

Chelsea:
So I don’t do that anymore. I’m all index funds. And frankly, I’ve talked about this before, most people in my industry were 80% plus index funds because we recognized A, how hard it was to do this right. And there’s all kinds of regulation around, you can’t invest in things that you’re invested in or that you’re a specialist in. And so when you took us out of… So I could never invest in metals and mining and industrials. I don’t know those other companies and I knew how much work it was to get to know those companies, and I was like, “Ah, just index fund investment is way easier.”

Mindy:
Oh, oh. I’m sorry. Go back and say that again. “I know how hard it is to learn all of this so 80% of the professional investors are in index funds.” Say that part again because that’s so important.

Chelsea:
Yeah. So, most professional investors primarily invests in index funds. It’s just… it’s simpler. It’s how it works. There’s regulation involved there too but we know that even when [inaudible 00:11:16]intricately super deep knowledgeable about a company, it’s not easy to get it right. And we had the benefits of sitting down and interviewing the CEOs and CFOs. We had the benefits of going and visiting the plants and talking to customers, and it was still really freaking hard and we still got it wrong sometimes. And so index funds… People ask sometimes like, “Could you beat the market with stocks?” And sure you could. It’s possible. But how much… if you’re just an average person, how much of your life do you want to dedicate to researching your stock portfolio and fixing it? You’re better taking that energy and going and earning more money, and just investing in low cost index funds or investing in real estate, whatever you want to do. That’s a better way to optimize for most people and so that’s what I do and that’s what a lot of people I worked with do.

Scott:
Can you briefly explain the concept of alpha?

Chelsea:
Yeah, sure. So alpha is how much money you make versus the basic index. And so some of that… The beta is just general volatility and so that’s how much the market moves up and down naturally due to cycles, due to news, whatever. Alpha is how much actual gain you benefit from by how you choose stocks. And so for us, some companies will say like, “Oh, we have this alpha generation over the market of 5%,” or whatever which would be crazy [inaudible 00:12:35]5%. But if you look at the sectors that they actually track to, so maybe versus the whole S&P they’re 5%, but if they only invest in distress, do they only invest in metals and mining? That alpha might only be 2% or 1%. So you have to compare it properly to what the underlying index is. But yeah, it’s just that. What your actual benefit is from stock picking.

Scott:
What’s the really good alpha for… what are the best you came across from somebody who managed assets or picked these winners in the industry? What would be like good, in the eyes of your bosses at Goldman?

Chelsea:
Yeah. So, it’s hard because in a year you can see-

Scott:
Like over a five year period, I don’t know.

Chelsea:
Over a five year period. I mean, over a five year period you’re talking 5%, 10% maybe in the hedge fund world, over the index. But in a year, maybe you see 30% but then the next year you’re probably going to miss, so it’s really hard [inaudible 00:13:32]. And I think that most of the time it depends on what you do too because in debt investing, a good alpha’s 50 basis points, half a percent because you’re not talking about as much gain. The difference usually isn’t that high and five year period is… The longer you stretch that period out, it’s not that different. You’re getting closer and closer to just the market.

Scott:
The point I want to make with this is if you are a… on your own, building private wealth and you’re building a $100,000 to invest, which is a lot of money, right? And you’re getting an alpha of 5 to 10% over 10 years, that’s 5 to $10,000 over those 10 years, versus an idex fund. If you’re one of the best in the industry, if you’re good, right? And so that alpha has to be earned and how many hours have to go into being able to generate that in a… I don’t know. How many hours would have to go into generating that [crosstalk 00:14:24]?

Chelsea:
It’s a full time job, Scott. I mean, that’s what you do, right? It was like our whole… We were working 80, 90 hour weeks and we had teams, right? I had people that worked underneath me. We hired experts. It’s so much work and I think-

Scott:
What’s the hourly rate for a $100,000 investor getting that 10… I don’t know. I’m just [crosstalk 00:14:43]I’m going down a rabbit hole because I want to emphasize how hard that is to do that, right?

Chelsea:
And I think I want to be clear [inaudible 00:14:51]. We can talk about the best of the best. But there’s all the statistics of 95 to 99% of active investors, professional active investors, underperform the market long term, like over a 30 year period.

Mindy:
Oh, say that again too.

Scott:
Is that net of their fees to investors, the returns their investors receive net of their fees?

Chelsea:
There’s bunch of different studies that go into that and I don’t remember which number is which but you end up in the same place where you’re like somewhere between 90… [inaudible 00:15:20]some of the [inaudible 00:15:21]that are lower that are like, “Hey, 90% or 85% underperform the market over a 30 year period.” They don’t correct for survivorship bias, so like funds that just go under in a 30 year period. They just remove those so then that number should be higher.

Scott:
Oh.

Chelsea:
You see what I’m saying? So there’s all this stuff that goes into it and that doesn’t include… hedge funds are a little bit different. High risk. But I’m more looking at mutual funds, general managed stock portfolios. When you’re getting into private equity and distressed, yeah, there’s a ton more risk but the return differential is much higher but you can’t do that as an average person.

Scott:
I have one more question about this real quick. At Bain you said you managed distressed debt, right? So non-performing debt I imagine. Can you explain how one produces a return on an investment by investing in that asset class and how you go about generating alpha again in that area?

Chelsea:
Absolutely. So there's two sides of that. So distressed debt can either be companies that look like they're going to go bankrupt and so their debt starts trading at a really reduced rate or that's already bankrupt. And so most of the time in distressed debt what you're doing is as a company is approaching bankruptcy you're picking up positions in their debt as they get closer and closer to bankruptcy. There's usually not a lot of trading that happens once they actually file. It does happen but not as often. And so let's say they had a term-loan, which is secured debt, so more like a mortgage on your house, in debt it will be trading at a 100 if it was worth a $1 for a $1. So it gets down to like 30 cents and you buy up a huge swathe of it. You buy up 20% of that term-loan. When they file, you now are the first creditor in line. And so you're trying to get first cash paid back if you can, and equity if you can. And so you're looking for companies that you think actually have value and can come out and operate as companies once they shed bad debt, shed bad assets. And then you own that company on the exit, you improve them, you do some capital investment and then you try to sell the company or re-IPO it to make your money back and make a really good return.
So this is… It’s a lot more than kind of just general stock trading because you’re really trying to manage the company as well and you have to be able to know enough about the industry, and enough about the company’s assets to know what can this company do and how much is it being mismanaged, how much of it is market cycle. And so that’s… the way you generate alpha is getting enough equity or getting enough return to see like, “Hey, the market is undervaluing this because they don’t see the kind of diamond in the rough that this company could be if we fixed it.

Scott:
Thank you. Yeah. I find those [inaudible 00:17:58]interesting so I wanted to ask some questions there. So thank you for allowing us [inaudible 00:18:02]into this.

Chelsea:
Absolutely. I haven’t gotten to talk about it in a while. [inaudible 00:18:06]throwback here.

Mindy:
All of that sounds way easier than investing in an index fund.

Chelsea:
Way easier, yeah.

Mindy:
Way easier. Yeah.

Chelsea:
[crosstalk 00:18:15]totally easier.

Mindy:
So because we’re talking slightly about index funds or not at all on index funds, how do you invest in an index fund? I have a thousand dollars, I want to put it in index fund, how do I do that? Just [crosstalk 00:18:28]as a regular person.

Chelsea:
Open an account at a brokerage. You could go to Fidelity or Vanguard or Charles Schwab [inaudible 00:18:34]tend to be the lowest fee options. You move your money from your bank into your brokerage account and then you pick either an ETF or a mutual fund that is labeled index. You can look for an S&P 500 Index or a total stock market, total bond market, and then you just put your thousand dollars in there and then you’re done. And you’ll always get the market return. You won’t generate any extra alpha over the market but you also won’t lose any money under the market. And so you’re done.

Scott:
Do we have a resource anywhere that… we get this question a lot, that is a literal walk through about transacting on an index fund? Literally like the mechanics behind purchasing that. Do we have a linkable resource to that anywhere?

Mindy:
I don’t know. Chelsea do you have a step by step…?

Chelsea:
I don’t have… I’m trying to remember, so we have the Money Mamas Guide to Investing that talks you through opening your first investment account and why you should invest. And now I’m trying to remember how detailed we go into buying that fund. I know we have some screenshots of what you’re looking for in some of the dashboards but that’s a good question Scott. I’ve always just assumed it was so straightforward. I don’t think we got super detailed.

Mindy:
Well, let’s-

Scott:
I think we should create a video for how to open up a brokerage in Robinhood, [E*TRADE 00:19:45], Fidelity, Vanguard. Just go through them one by one and create a little video on literally mechanically how easy it is to actually do this so that people can feel comfortable [inaudible 00:19:54]buying a Vanguard index fund, through an… or ETF through any one of those.

Chelsea:
Absolutely. That’d be great.

Scott:
Let’s clarify what an ETF is.

Chelsea:
An ETF is an exchange traded fund. So, similar to a mutual fund. So index funds can be an ETF or a mutual fund. Similar to a mutual fund, it’s like a basket of investmentS, right? Imagine a suitcase and you’re packing all the different stocks inside of it. So for an exchange traded fund, it’s a basket of investments and then they break it into shares. So the difference is a mutual fund trades once a day. And so you can buy and sell, you can put in your buy and sell orders all day, at the end of the day the market closes, they set the price of all the things that are in that basket which determines the price of that mutual fund and it trades once a day. An exchange traded fund trades on a exchange like a stock. So it moves up and down throughout the day based on the underlying investments and based on primarily the supply and demand of that fund during the day. How many people are buying and selling it during the day?
For a general index fund, you’re not going to see much difference between an exchange traded fund and a mutual fund. The biggest difference you’re going to see is that in most places you can’t buy partial shares of an exchange traded fund. You can of a mutual fund. So if you had a $100 and each share of an ETF or a unit of an ETF was $30, you could buy three and then you’d have $10 just sitting in cash. And so your cash yield, there’d be a pull from the cash just sitting there and not being invested. For a mutual fund, you can buy fractions of units. And so they would put the whole… a $100 into the market and you’d have 3.33 units of a mutual fund. But in general, they’re going to operate about the same. And so sometimes like for a Vanguard, there’s minimums. There’s higher minimums on some of their low fee mutual funds but you could go do the ETF and you’re basically getting the same experience. It’s just that it trades value all day long.

Scott:
Thank you. Yeah. I invest in both. Personally, I have a mutual fund through my retirement plan and I invest in ETFs in my after-tax brokerage account. Same index funds or index funds that track the S&P 500 for me and one of them happened to be a ETF because that’s easier to purchase through Robinhood which is the brokerage app I use on my phone. And then the retirement account we have through work.

Chelsea:
Yeah. We don’t want to get too far down the rabbit hole here but I’m going to mention that some of the other ETFs that are more commodity driven, so if you were buying a gold ETF or an oil ETF, those actually have physical assets that underlie the value of that ETF. And so in moments when there’s high volume trading, you can actually get a gap between like you’re paying more than you actually own in oil or gold with that unit. And they will eventually square it up but there’s times that you see those ETFs really jump incorrect because they have to fix… they have to either go buy a bunch of gold to fix up what they own as a ETF and so that can cause some changes and so they’re a little bit different when it comes to that. But if you’re just doing stocks, you’re just doing index funds, they’re basically the same.

Scott:
That sounds very interesting for a Golden Sachs equity analyst. Alright. So let’s get back to your story here. So you are at Bain Capital, I believe is where we left off, and what’s kind of your wealth position as you enter and maybe exit the career with Bain? Let’s pick up the story there.

Chelsea:
Yeah. So right around when my first child was born, I started to have this like, “Ugh, I can’t actually survive in this career for 40 to 45 years.” It just wasn’t serving my purpose. I liked what I was doing but I had been switched in some sectors that I didn’t enjoy covering as much anymore. So it was getting harder. And everything just felt like I wasn’t living as the person that I wanted to be. I was also struggling with some postpartum depression and so that played into it. But during that period of time I discovered the FIRE movement. And so because we’d always been saving 50 to 75% of our income, we realized we were on track. We could FIRE by the time I was 37, I think. At this point I’m 28, okay. So we were like, “Oh. We don’t have that long. Should we tough it out? Should we wait?” Whatever. We decide we’re going to stick it out and try to make it to our FIRE age and then do my next age career.
And during that period of time I really needed some kind of passion project, so I started a blog. Smart Money Mamas is the name but it’s original name was Mama Fish Saves. There’s this whole story that goes with that but I let my mum’s group name the blog. I was answering their money questions and I loved it. It completely… it was growing. We were answering mums questions. I was tying in all this money knowledge I had but also helping families and educating, which kind of pulled back that other [inaudible 00:24:36]of me. And so as I… We got pregnant with my second child, I had major back issues. I had three herniated disks in my back while I was pregnant with him. My water broke early and he was almost a preemie. So we had all this stuff going on and so I was in the hospital with him. This is December 2017 and I was like, “I don’t think I can do this anymore. I understand FIRE is eight or so years away, and I know we can make it but what’s the cost? How much of their childhood am I going to give up? How much of my health and well-being am I going to [inaudible 00:25:09]up to keep doing this job?”
And so we would up our FIRE spreadsheets, literally in the hospital and it’s December so it’s like before the holidays, my husband and I we pulled it up and we said, “How long do we have? If I left right now, how long do we have of runway?” Because he’s a stay-at-home dad. So we would be going from mid six figure income to zero, overnight. I do not recommend mankind this decision by the way in a stressful moment of your life, in a hospital, but we did. We set down and we said, “Okay. We’re [inaudible 00:25:37]FIRE already. If we don’t add anymore money to our retirement savings from now until the future, we will be FIRE by the time I’m around 45. Okay. That’s great. We’re still way before traditional retirement age. We have two years of cash runway to build this business.” For me to [inaudible 00:25:53]zero to enough to live, because we don’t have to save for retirement anymore. The kids college funds were already also built up. “Are we willing to take that risk? Are we willing to say two years, you get two years to figure it out and either go back to finance, get another job, get into consulting, if it doesn’t work out?”
So we said, “Yes.” And I called my manager and just said, “Listen, I need a break. I need to do something else. I have loved this opportunity. I’ve loved the intellectual development but I think after everything, I need to break.” And they were great about it. They were definitely a little bit confused about what I was going to be doing for work but I’m grateful that they paid me through my maternity leave, they still gave me my bonus for that year which also helped us with out goals and things like that and we transitioned and I went from hedge fund to working from home with a two year old and an infant a few weeks later.

Scott:
So was your wealth primarily in, at this time, a two year cash reserve and then retirement accounts? Was that what kind of empowered you to feel comfortable making that decision or did you have other assets outside of those kind of two buckets?

Chelsea:
Yeah. So we were primarily cash. We had some traditional taxable investment accounts we could have pulled on and then we had retirement. We would have pulled some money out of taxable and then we were also… We had a house in Boston and we knew we weren’t going to stay there if I left that job. We would either move closer to family. We were talking about moving to Vermont and doing more of like a homestead thing. But we knew we would be able to take some equity out of the house which would have helped the runway. When my prior employer decided to pay us through maternity leave, we didn’t end up having to take money out of the market but we did have cash accessible. We weren’t going to have to tap retirement accounts and that gave us some comfort. I wouldn’t have done that. So we had some wiggle room.

Scott:
So it sounds like there’s a lot of math that went into this to calculating this runway. And it sounds like you were planning on expenses changing after you left your job as well. Can you walk us through kind of how you were doing the back of the napkin on those?

Chelsea:
Yeah. So I use a tool called OnTrajectory that you can put in all your different assets and it will… you can set different growth rates for them, different inflation rates, and it will chart out. And so we could move money around in there pretty easily. And then I had a robust spreadsheet to track some of these things that we were pulling and I have budgeted every dollar I have ever made in YNAB [inaudible 00:28:14]You Need a Budget, since my first job. And so I've used it since it was a desktop app and so we had a ton of information about where our money went. And then I'm a researcher so we kind of knew when we hit FIRE eventually we wanted more property. We wanted to do that homestead thing. So we'd been doing research on okay, "What do things cost? What are costs of living in different states?"
In that stressful moment, I will be honest that we basically said, “Let’s take our expenses and assume they’re the same as right now, and that there will be probably be places where costs will go down. Our cost of housing will go down. Our cost of food and just general expenses will go down but we’ll also have to pay for our own health insurance. We’ll also have other things changing. And so let’s just assume it’s awash and we’ll figure it out as we go.” And I think this is a big thing we’ve always thought with budgeting of there’s no fixed number. As much as I like to sit down and build a spreadsheet and try to project five years in the future, it’s just never going to be right, exactly, and so it’s okay to shift as we go.

Mindy:
Okay. You just said, “We’ll figure it out as we go.” But I think that is a flip comment from you because it doesn’t like you were figuring out as you went. And while this sounds like you were seating in the hospital and like, “You know what, I just want to quit my job.” This was a calculated move from you for a long time, you just didn’t know it yet. And I just want to point that out if there’s somebody listening who’s like, “Wow I really hate my job too. I’m just going to quit.” No, Chelsea set herself up, knowingly, unknowingly. We did the same thing. We were saving a large percentage of our paycheck… my husband’s paycheck, I was a stay-at-home mum, because we didn’t know what to do with it. You just invest it but we certainly weren’t spending it on everyday things because we’re just cheap like that. We just… we don’t spend a lot of money. So-

Scott:
Frugal.

Mindy:
What?

Scott:
No. Just [crosstalk 00:30:04].

Mindy:
Frugal? Did you say [crosstalk 00:30:05]? Yeah, yeah. No. We’re cheap. No. It’s a combination but once we discovered financial independence, my husband said, “Hey. What do you think of me quitting my job?” I’m like, “Do it because you’re so miserable.” I knew we would be fine even… I mean, we didn’t have all of the spreadsheets but it sounds like you really did track everything. And what’s the number one piece of advice for people who’re just starting out, Scott? It’s track your spending and make a budget. Track where your money is going in and out because that’s so important to know.

Chelsea:
Absolutely. And that flip comment was more about how we’d figure out the budget [inaudible 00:30:41]figure out where we got money because you’re right. We had built this runway and we didn’t know what it was for yet and I think that this… We can talk about too, some of the struggles that happened after I left. I think that, that would be really beneficial for people who are just listening of like, “Oh, this would all be better if I just reached FIRE. This would all be better if I just quit my job.” I do want to talk about that. But first and foremost, I needed a kick in the pants to make a change. We were ready. I could do it but I was scared. I was scared of giving up the income. I was scared of being a young family, being the sole income provider and not having income. Obviously that’s not an easy thing.
And it truly took being in the hospital and having had spent that entire pregnancy up to that point… Guys I could sit or stand for longer than 10 minutes and so they had to put a standing desk in my office and I had to stand until the timer went off and then sit down again so that I could continue to operate and not end up in the hospital because my back was so bad. And there was… A lot of that was stress induced, was emotional induced and I still kept showing up to that job and it wasn’t until we were literally with an NICU doctor being [inaudible 00:31:54]around the NICU if we were going to have this preemie baby that I was like, “Something has to change.” And then I was willing to say, “Okay. We have the big building blocks in place. Let’s figure out the rest of it as we go.”

Scott:
One of the things that… before we get to the challenges after you left, putting yourself in the shoes of someone who’s listening and maybe they earn a moderately high income but maybe not mid… oh you mentioned casually mid six figures, which seems like a large amount of money from an income perspective [crosstalk 00:32:21]. Yeah. But suppose you’re in Boston, or a coastal city like New York and you think you’re doing pretty reasonable on the spending front there, what advice would you have for somebody to be able to put themselves in your position from the optionality that you seem to have at early 30s here?

Chelsea:
Yeah. I think tracking is really important and determining what actually brings you money… brings you joy to spend money on. I think a lot of… in the coastal cities there’s so much pressure to go out and… the cost to go bowling in New York city or Boston is ridiculous, right? And so it’s a little bit deciding what kind of lifestyle do you want to live and how much are you willing to… I hate the word sacrifice because it’s just shifting. And so we had… in New York city where everything is really expensive, my friends and I used to have what we called DOFs which were days of fun and we would track some kind of frugal fun. So we would do a game day or we would go drive out into the more rural areas of New Jersey and do apple picking. We’d do these activities that we were all together but it was pretty cheap. And so we just changed what we wanted our lifestyle to look like, to save more.
And then if you want more optionality, sometimes if comes down to, you’ve got to live those coastal cities. And so if you’re going to make a change, if you’re going to go become an entrepreneur, or do a different career, start to do some research… We just started looking on Zillow in other areas. We looked near our parents. We looked in Vermont, my mum has a house up there. And like, “Okay. What’s it going to cost if we no longer live in one of the most expensive parts of the country?” And that gives you a lot more option too.

Scott:
It does sound like if you’re in one of these coastal cities there’s ways to reduce your spending by keeping in control of that but that I’m gathering the real answer, underlying this my snarkiness is, “You got to earn a pretty high income if you’re going to be in one of these coastal cities and you’re tying to FIRE. And if you’re not earning that high income maybe that… what are you doing in that coastal city if this is a top priority for you? It’s going to be that much more difficult to save given the housing and other higher expenses of living.” Is that a fair… Am I going too far with that?

Chelsea:
I would say that’s a fair assumption. I think either you got a side hustle, you’ve got to figure out ways to make more money. There’s ways to… more roommates, living in a different part of the city. Try to reduce expenses. But yeah, at the end of the day if you’re going to live in an expensive part of the country, you either have to make a lot of money or you got to move. If you want to FIRE early. And I hate that, like say that so flippantly but it’s true. I think that some of these stories sometimes people… And we get people in our community who reach out and are like, “I just saw this headline about this guy that retired at 34. I can’t figure out how to make it work.” And I’m like, “Well, if you make $70,000 a year and you live in Boston, yeah, you’re probably not getting retired at 34.” There’s actual fundamentals of you have to have the money to be able to save it and build up the nest egg.

Scott:
Or you got to find some way to live for free or be super frugal like a house [inaudible 00:35:18]. I don’t know. Maybe.

Chelsea:
Exactly. You could house hack or something like that.

Mindy:
Yeah. Well, I think that that’s really important to [inaudible 00:35:24]over is, there are certain fundamentals that are true. You need money to pay your rent or mortgage. You need… and that money doesn’t have to be you working at a job but it has to come somewhere. So I think that there’s a lot of people who just… they do read the headline, “Oh, they retired at 34 and they live off of $30,000 a year.” Well, when you rent for $3,600 a month, you’re not going to live off of $30,000 a year unless there’s another way to cover that mortgage besides money coming out of your own pocket or… I’m sorry, the rent. And in some cases, there’s no easy button. You’re not going to be able to make little money in… and this sounds so [inaudible 00:36:11]and I don’t mean it to be but in an uneducated job in New York city, you’re not going to be able to retire to the Hamptons at 34 unless you win the lottery which is not a real valid option.

Chelsea:
And I wouldn’t necessarily say uneducated job, right? I mean there’s so many nonprofit centers and things that operate out of New York where, yeah, you’re not going to make a lot of money and you could, I mean, [inaudible 00:36:33]a lot of people who have advanced degrees and who are doing important work for the world but there’s not a lot of money in it and so that requires either you find another way to make money or… it’s a balance.

Scott:
That or… I guess I’m trying to think, relate this to my own experience, right? Living in Denver, which is not a coastal city but not the cheapest place. I was making 48, $50,000 my first year and I was able to save 20, 25 because I ate onions for my dinner. I would literally cook an onion for dinner. I lived in a small apartment with a roommate. I lived a lifestyle that most people would not want to sustain for an indefinite period of time, right? So it is possible you’re going to have to just get super aggressive on one of those expenses or income and if you’re in a coastal city it might as well be income because that’s the advantage of living in a coastal city I think. Right? Is, the job opportunity is better.

Chelsea:
Agreed. [crosstalk 00:37:29].

Scott:
Okay.

Mindy:
You ate onions for dinner?

Scott:
Yeah. Virginia is going to [crosstalk 00:37:34]that. Yeah.

Mindy:
I’m just going to let that go.

Chelsea:
I’m not.

Scott:
I would saute an onion basically and then consume the whole thing and it would [inaudible 00:37:38]out of-

Mindy:
While you had a girlfriend?

Scott:
… the pores.

Mindy:
I was going to say you must have smelled lovely.

Scott:
I was single for a long period of time while that practice continued.

Mindy:
You were and I was wondering because you’re a good guy. I was wondering why you were single. No longer do I wonder.

Scott:
Yeah, that’s why Josh, we used to work in the same office. He gave me my own office after a few months.

Mindy:
Well, Virginia you are a saint. Okay. Let’s get back to Chelsea because this is not the Scott episode. This is the Chelsea episode.

Scott:
No. Good. So you wanted to talk about some of the things that were difficult for you after you made this transition and left your job, right?

Chelsea:
Yeah. So I mentioned earlier [inaudible 00:38:21]decision, right? I wasn't going to teach or was I going to go Wall Street. Feeling this value of self worth equals net worth, that was very… it was deep. It was not something I was super aware of. It was just… We talk about frugality, right? I'm not actually a particularly frugal person as I've… We like having someone come clean our house. I will pay for that and I enjoy some of those things. But early on, especially a few years ago, I could not spend money. And so the memory I always talk about is, got my first Wall Street bonus and I could not buy a bicycle. I was in the bike store. I biked every weekend. And I was almost in tears. Like, "No. I can not let my bank balance go down." And I was with my mom and she was like, "We should probably talk about this." Like, "This seems ridiculous." And I just, I couldn't separate from it.
And so for a while when I was in that career, I didn’t have to think about it because we had enough money that it wasn’t… I could do some of those little things. I could have someone come clean the house and it didn’t impact our overall savings rate. I still got to see our bank balance, I still got to see our net worth go up a lot every single year and so it didn’t bother me. And then I left my job and I went from getting these mid six figure paychecks and big bonuses at the end of the year to no income. Zero. My husband’s a stay-at-home dad. The business had never… Smart Money Mamas… Mamas Fish Saves at the time, was a hobby. We didn’t have it monetized at all and it was scary as hell. And I had these moments… I started to have these real fears that my kids were going to resent me because I’d taken these opportunities away from them that, that job would have provided, having more money like schooling and things like that. My kids are at this point infants, right? So I didn’t mean now. I meant in the future [inaudible 00:40:11].
I thought my husband was constantly mad at me. He was not mad at me but I was like, a certain lifestyle we got married under the assumption of and now we are not living it. And it was all in my head. But I had this every month the bank balance went down. Total fear. When I mentioned thinking that just FIRE will solve the problem or just quitting your job will solve the problem, what started to happen really quickly in that first… a month, I mean I intended to take two months at least of maternity leave with George before I started building the business. Within that first two months, I took my first freelancing client from the same hospital where I quit my job. I never intended to be a freelance writer but I was line, “We need money coming in.” And Jeremiah is like, “We just said we have two years.” And I was like, “No. No. We need money coming in. I’m going to take this freelance job.” And so I started freelance writing, I started doing some consulting for small businesses. I was doing all these other things and I saw opportunities to build the consulting business in particular to a high income more quickly than the business, and I almost did it. I got so close to making that decision.
And I had to… It literally took my husband being like, “You’re chasing money again. We’re going to end up in the exact same place. We’re going to be doing well financially, and you’re going to be unhappy that you’re going to be doing something that doesn’t matter to you and that you’re going to feel like you’re not being yourself. And so how can we break this?” And it took months and months to really recognize that A, we were safe. I think part of it was a safety concern, and B, that my family and my friends and myself, I was okay and I was valuable regardless of how much money was coming in in that moment. And so there’s so much self-work that goes into these big transactions and recognizing, what are you doing this for? And what inner problem are you trying to solve by big giant life shifts? And making sure you’re not just jumping from job to job, from location to location, fixing an internal problem externally.

Mindy:
Oh that’s huge. I think so many people are focused on the RE that they don’t look at what comes after RE. They don’t think about how they’re going to spend their days. You have 24 free hours or 16 if you’re going to sleep but you still have a lot of free time. If you have little kids, well now you have no free time again. But finding a way to fill up your days is not going to be as difficult as you think it is but you’re just going to do all the things that you do on the weekend and… at nights and on the weekend right now, all the time. So if you come home from work and you’re watching TV until you go to bed, that will just be your whole day. You can find something on TV. What is that Bruce Springsteen song? 57 Channels (And Nothin’ On) and we’ve got like 580 channels now or something. There’s nothing-

Scott:
So much Great British Baking Show.

Mindy:
Great British [crosstalk 00:43:07]Baking and oh, and Netflix, and Hulu, and all those other channels now. You can really find a ton of crap to watch. Is it fulfilling you? No. Scott is going to retire at some point in the future, and he’s going to play video games for six months and I think that sounds like a punishment. Personally that is just not what I want to do.

Scott:
That would be really bad.

Mindy:
I think Scott is actually going to do it for like a week. In a week I think you just kind of reset. There’s some stuff in the homeschool world, which I know 2020 everyone is a little bit in the home school world, of when you first take your kid out of traditional school to bring them to homeschool, they let hem unschool for a while which is like let them… don’t set anything up. Let them just become kids again. And then try again because if you just try to do traditional school at home, it’s not going to work. And I feel like there’s some adjustment period where you just… you have to play video games for a month and realize that you’re not happy playing video games for a month. But I tell this story partially because I think so many people spend years preparing for FIRE and they’ve built this whole identity around being someone who earns good money, who saves a lot of money and then when they step away from their job, and they’re not putting that money away, there’s a shift. You have to redefine who you are and what you want to make that adjustment smooth and feel like it was worth it. Yeah. Who did we have on Scott, was it the Retirement Manifesto? Who said he had-

Scott:
Doc G. Doc G talks about this a lot. Is that what…?

Mindy:
Fritz was the Retirement Manifesto, where he had like a five year plan or something to transition out.

Scott:
Oh, yeah.

Mindy:
And it’s not just, “Hey, I quit my job and then I’m done and I can go live the life that I want to live.” You have to plan for it. It has to be a conscious decision otherwise, yeah, you’re just going to get sucked back into whatever it was you were doing before.

Chelsea:
Absolutely.

Scott:
Going back to what we mentioned early with the Doc G part of [inaudible 00:45:02]mental self identity that kind of goes with, “I think a high end career in hedge fund or distressed debt,” and all these fancy terms and companies like Bain and Goldman, what was that like for you shifting away from that career?

Chelsea:
Yeah. I mean, that goes back to the identity and the self worth thing too. For a while, I mean the first year plus I had to qualify. People were like, “What do you do for work?” And I couldn’t just be like, “Oh, I’m a blogger. I run an online media company.” I was like, “I used to be a hedge fund manager but I left to do this thing.” And I had to take this piece of identity with me to qualify that I had earned the right to go do this different or silly sounding thing for some people that don’t understand blogging or don’t understand the online media world. And it took a while for me to just say like, “No. I love this work more. I think this work is more important, has a bigger impact on society.” And now I’ll just say… people ask, I’m like, “Oh, I run a business teaching mums about money.” Or, “Oh, I run an online blog teaching mums about money.” And people that meet me don’t know I had that old career, most of the time. But yeah, for a while I still was so tied to that identity.

Scott:
I guess, it’s not really a money thing at this point that’s keeping you from [inaudible 00:46:13]the job or [inaudible 00:46:14]for people. How do you address that ahead of time or figure out a way… people want to FIRE. We get that all the time and in these high end careers, typically what we see is people go way past the point of having more money than they need because it’s not really that difficult when you make six figure income to accumulate it enough to mathematically achieve FIRE. But it comes all [inaudible 00:46:37]that stuff so how would you prepare yourself for that? To [inaudible 00:46:40]mentally outside of the problems you struggle with. Sorry.

Chelsea:
I think this is a lot of self-work and identity work. And who are you? What’s important to you? What do your friends value about you? And this is not necessarily asking them but recognizing, who are your people, what do you want to be, what do you want to be known for? And I think sometimes especially when we’ve been in deep careers or big name careers, so many hours of our life are dedicated to that career that we do, we do think we are just a doctor. That we are just a hedge fund manager. We’re just an investor. And we have to start to build up some of those other things whether it’s that transition Mindy was talking about with the five year plan that Fritz has of, “Okay. I’m going to go to part time for a little while and build up some hobbies. Build up my bridge to what my new life is going to be.” Because cutting it the way I did is hard because you have built this identity up. So I think it’s giving yourself some time for introspection and also just some quiet time.
I think so often we schedule everything in our day and especially with young kids you don’t have a choice, right? Your day is just crazy. But it’s blocking off like for an hour I’m going to do whatever I want to do. Like, I’m going to research something that I find interesting, I’m going to go read a book. And just give yourself some space to start to figure out who you’re going to be after that transition.

Scott:
Mm. That’s good advice.

Mindy:
I think that’s so good. There’s a lot of people who are… especially these high powered careers, these… you’ve been going full on for so long that it’s hard to stop and relax. This is something that my husband has a problem with even three years post retirement, is he can’t just sit there and read a book. He’s finally started reading Steven King at night. But it took [crosstalk 00:48:29]two and a half years. I know, “Why would you read Stephen King at night?”

Scott:
How does he sleep?

Chelsea:
I was going to say, that’s really screwing up your sleep there.

Mindy:
Well, he doesn’t allow himself to relax during the day. He just goes full on but at night instead of reading something that furthers his education he will now read something just for enjoyment, which is Stephen King.

Chelsea:
Mindy this is so funny though because it was only fairly recently, in the last year or two, that I was realizing I felt really mentally drained a lot. I was just tired. Didn’t have as much creative energy. And I was looking at how I spend my day and I was like, “Oh my God. I’m either working. I’m reading a nonfiction book or I’m listening to a podcast about business or money,” or whatever. And I was like, “I am constantly consuming information or creating.” And I remember I took a week and anytime I was in the car instead of listening to a podcast, I just listened to a playlist of some of my favorite songs. And I had so much more energy at the end of that week because it was moments, it was not anything big but it was like moments of a mental break to not try to be productive, to not try to earn more money. To just take a moment to yourself. I think that’s a huge thing and we have to practice it because we’re not very good at it, a lot of people who are super high achievers.

Mindy:
Yeah. I think that’s really, really smart. Yeah, I was delighted to see him take a book that didn’t teach him anything and just read it.

Chelsea:
Fantastic. Maybe something a little less terrifying.

Scott:
Some [crosstalk 00:50:00]people are listening. They’re like, “Who are the hell all these people?” I’m the same way-

Chelsea:
We are not super relatable right now.

Scott:
… as Carl and Chelsea. Yeah. But yeah.

Mindy:
No. You know what? I think that we are super relatable right now [crosstalk 00:50:11]because there’s a lot of people who’re listening to this show who are the high achievers and, “Oh, I got to do something with my life every minute of the day.” It’s nice to accomplish things but it’s also nice to take a mental break like you said, you feel recharged. I purposely… when I don’t have time to listen to a podcast in the car when I’m going to the grocery store two minutes away, I purposely will just listen to a song that I really like. I just discovered how to download music on my phone so now I can listen to all those great songs again.

Chelsea:
So fancy.

Mindy:
It was a struggle. My husband showed me. I didn’t do it myself. But it’s nice.

Chelsea:
But my audience is primarily mums and so… primarily working mums and I think that, that… you get this extra layer of like we talk to women, they’re like, “Okay. Blocked off 15 minutes to read but the whole time I held that book I was like, ‘I should be folding the laundry. I should be doing the dishes. I should be playing with the kids.'” And it takes practice. This is another thing that we talk about of like, yes, the first few times that you sit down for free time or break time, your brain will not relax. You have to keep doing it until you learn how to take a break.

Scott:
So Chelsea, it sounds like… if I can sum up this story that you shared with us, that you have been… I’m just going to [inaudible 00:51:30]went to a really good college, then got a very coveted high income grueling job at Goldman Sachs, which I imagine based on the folks that I know, is a continuation of a ridiculous career that’s stacked up with class after class after class and extracurricular, extracurricular, going through college all the way into equity analysis at Goldman. Is that reasonably correct?

Chelsea:
Yeah. Absolutely. It was the whole way, “Can we check all the boxes? Can I do all the things I’m supposed to do on the life checklist?”

Scott:
Alright. So if I’m listening to this show, do I have to be that person to retire early and be good with money or is there… is this success that you’ve had accessible to people who maybe haven’t done that with their whole careers and get started like that?

Chelsea:
Absolutely. Absolutely. And I think that there’s so much of this that is limiting belief, right? And that is these old wounds we have about money. And I think no matter who you are, whether you’re a high achiever, checking all the… perfectionist, doing all the things or you’re someone who’s convinced themselves they can’t be good with money and they’ve gotten into debt and they’re in a place where they feel like they’re kind of struggling, I think any of those people have money mindset work to do to find the success they want with money. To reach FIRE and feel comfortable and happy with that decision afterwards. And we talk… the first step we talk about at Smart Money Mamas is getting clear on your money story and what you believe about money so you can start to heal it.
And I think there’s so much of what we learn about money. And so studies have shown that kids understand the basic concept of money by age three and that most core money beliefs are set by age seven. And to most people that blows their mind, right? By age seven you haven’t even really handled money but you’ve watched your parents handle money, you’ve watched people in your lives talk about money and you’ve set these rules with a complete lack of perspective. A complete lack… you’re not an adult but you’re trying to create order in your life to feel safe and so you see one instance and you make a huge decision, right? You make this thing and then you carry it through. And so no matter where you’re starting, you can build a healthy relationship with money. You can build the financial [inaudible 00:53:43]success you want, but I would recommend starting with doing some of the introspection. Figuring out, where are you limited and how can you get better?
And so we will tie it back for me for a second with the self worth thing equals net worth thing. That came from my parents early on. My dad was super… idolized people who had wealth. He idolized people who were successful and so I internalized that. Of like, “Okay. If I want his approval. If I want my parents approval, I better go out there. I better make a lot of money. And I better have the big name job.” And so that limited me from entrepreneurship. It limited me how I looked at my options and so I had to break away from that a little bit to shift. And so sometimes we hear it, our audience people who are like, “Well, debt is just a way of life. You’re always going to have debt.” Or, “I’m not good with money because I’m a woman,” or “because I do this kind of job,” or “because my parents didn’t have money.” And resetting that really opens up what opportunities you even see in your life because when you have those limiting mindsets, you’re not seeing the doors. You’re just like, “This is the tunnel that I have to go down.” And so that’s where it starts and I think you can absolutely build the financial success no matter where you’re starting.

Scott:
Sorry. So I guess I [inaudible 00:54:52]. That almost made me feel like… you get set at seven and I can’t do anything about it so what can I do from an actionable standpoint to attack it?

Chelsea:
So what it means, set at seven, [inaudible 00:55:03]means that, that’s when you kind of internalized and sunk it in. It doesn’t mean you can’t change it. It means that you’re likely not aware of what it was and it’s been running on a loop in your brain for 20, 30, 40 years and do you don’t recognize it. It’s running in the background and it’s impacting the little decisions that you make. It impacts the emotions that come up when people bring up money. And so until you go backwards… and so the first exercise that we recommend people do is say, “What is your first money memory? What is the first time you remember somebody talking about money or doing something with money?” When you first come up with that memory, it’s going to seem… oftentimes it feels super tiny and you’re like, “Why? Why can I even pull that out of my brain?” [inaudible 00:55:50]I was six, seven, eight years old. And so sit with it. Sometimes people walk away for a couple days [inaudible 00:55:56]until they realize, what is the decision you made in that moment about money?
And so one of my favorite stories is from another woman about… she’s at the grocery store. She’s with her mom and they’re walking towards the checkout aisle and she sees these tiny dinosaurs. And she’s like, “Can we buy these?” And her mom says, “No. Dad only gave me so much money. We can’t get those.” And so she’s like, “I remembered that memory for a while, couldn’t figure it out until I decided my dad was the decider of what we were allowed to buy and not allowed to buy. And men control money.” And so this woman who had grown into this powerful feminist person was constantly looking for approval from her dad, was constantly looking for approval from her boyfriend and couldn’t make her own money decisions. It caused her a lot of anxiety to have to make her own money decisions but as soon as she brought it into the light, as soon as she recognized it, she’s like, “I don’t think that. That’s ridiculous.” And then she could move forward but it had been there impacting her and once she recognized it, she could see the times in her life when that had driven her but she had to think about it.

Mindy:
Okay. That’s really freaky.

Scott:
That’s really… yeah. That’s really helpful.

Mindy:
Because I’m listening to you say that and I’m thinking, “Oh, what’s my first money memory?” It was the time that I was [inaudible 00:57:07]with my dad and I wanted this giant pencil and I didn’t have 15 cents for it and the guy is like, “Oh, just take it.” And my dad said, “See, if you would have spent that money before then you wouldn’t have had time to spend it now.” And I’m cheap. I don’t spend money. And I’m just now, at age more than 40, figuring out that it’s okay to spend on something that you really like. Or something that matters to you. I just bought… I haven’t even… oh, it’s giving me a little bit of anxiety to even bring it up. I just spent $290 on a purse and I don’t think I’ve spent $290 on every purse I’ve ever had in my whole past life but it’s an R. Riveter purse which is… it supports spouses of military and it’s handmade, it’s beautiful. And I thought, “This is really cool.”
It was so hard to buy that purse and as soon as I bought it I was second guessing myself. And I bought it online it hasn’t even arrived yet but what is $290 to me now? Well, it’s no big deal. And I wouldn’t hesitate to spend $290 on thanksgiving dinner but why can’t I spend it on myself? Because of that stupid pencil when I was eight.

Chelsea:
That’s amazing.

Scott:
[inaudible 00:58:30]. Now I got go, right? With this… That was really helpful. So thank you for clarifying that. I wasn’t attempting to challenge I just was looking for clarification there Chelsea.

Chelsea:
No. Totally.

Scott:
And if I think about it, I don’t know why I have this. I don’t think my parents [inaudible 00:58:45]anything to this effect [inaudible 00:58:46]when I was a kid but I always had this thing growing up. I don’t even know if there’s a single memory but just every time at a restaurant, I’d be like, “There’s something I really want but it’s like two or three more dollars than this other item, that’s just more reasonable. I’m going to get that.” I just remember walking away being like kind of unsatisfied at a lot of restaurants with those types of things. And so that was my big thing.

Mindy:
That’s interesting.

Scott:
I set up an adult life where now I can get that $10 nicer thing if I want, sometimes it’s… I don’t know. For whatever reason, that was a huge blocker for me and so…

Chelsea:
And I could tell you mine real quick. So I saved up for some toy. Can’t even remember what the toy was but I saved up for it. It was like the first time I saved for something. We got to the store and as soon as we got there I was like, “I don’t know. I spent a lot of time saving up for this thing. I’m just going to keep the money. I don’t want to buy it.” And I was with my dad. And he was like, “That’s amazing. I’m so proud of you for saying this. This is going to make you successful.” He told everyone that story. That like, “Chelsea is just saving her money she didn’t buy the toy.” And I was like, “See, if you buy things then you’re not as responsible and people don’t praise you for it.” And so every time I saved up for something, it was like same thing [inaudible 00:59:57], major anxiety of like, “Maybe I should just keep the money in the bank.”

Mindy:
Yeah. That’s very interesting. Okay. So if you’re listening to this and you aren’t pleased with the way that your money relationship is going, think back to your first memory and what does that… sit on it and what does that teach you and what is that saying to you? Because that’s… I mean, I know I’ve talked about that stupid pencil on the podcast before, that was a big one. And I bet my dad would be like, “Ah, I don’t remember that at all.”

Chelsea:
Your parents will rarely remember your money memories but it comes back to the fact that you’re little and you completely lack perspective.

Mindy:
Yeah. That’s really true. Okay.

Scott:
Alright. Well, let’s wrap up and move to the financial scan? What do you guys think?

Mindy:
Yeah. I think that’s great.

Chelsea:
Sounds [crosstalk 01:00:49]. Let’s do it.

Mindy:
Chelsea we’ve recently added a new segment to the show called the financial scan because we want to know what you are investing in. Chelsea former hedge fund manager is clearly in all the things metals and mining and industrials. So where are you planting your money so that it grows for retirement?

Chelsea:
I have… In a 100% Bitcoin. No. That’s not true. No. So I am-

Mindy:
That was good.

Chelsea:
… I am invested in metals and mining and industrials because I own index funds and so I’m 95% index funds. We still have a very aggressive asset allocation, so we’re like 90% stock, 10% bonds within that 95% but all index funds. I have a 5% on my portfolio, is in old co-invest from work. So you had the option when you work at these funds to invest alongside the fund, which is a great opportunity because unless you’re an institution you normally don’t get to do that. And so I have some old asset that sits there. As that comes out it will go back into index funds, but they way that lock-ups work in a hedge fund it will probably be another several years before that money starts to come out. But it’s been doing well so I’m happy to have that little piece of it. But yeah, we are mostly index funds.

Scott:
Awesome. Did that portfolio change at all when you left your work?

Chelsea:
Not significantly. No. Because we weren’t retiring per se. The goal was to start the business and so we weren’t touching our retirement money so we didn’t move it around a lot. We did move a little bit more to cash right away to give ourselves a bit of a cushion but in general we’ve kept it the same. The only thing that’s changed is that our company-invest allocation has gone down a little bit from money we’ve added because I no longer am eligible to add to that portfolio, so at one point we were closer to like 7 to 8% in that space but not a lot of changes.

Scott:
And when you left your job you had two years of annual spending in cash, I believe, did that increase, decrease or change the same since then? What does it look like now and how do you feel comfortable in terms of cash on hand?

Chelsea:
Yeah. So we have about eight months of cash on hand now. The first year the business didn’t make much money at all. We had costs and so the first year of that got spent down and then as the business kind of grew and is at least covering part of assets, [inaudible 01:03:05]down. We haven’t taken any more money out of cash. I’m comfortable with eight months. At some point I’d like to get back to closer to a year just because entrepreneurship and kids, it’s always good to have a little bit of cushion. But no, we’re at about eight months now.

Scott:
Yeah. No. It’s interesting. Every person that we have now talked to who is FIRE has mentioned an eight month… actually at eight months you’re the lowest not to give you any [inaudible 01:03:31]but I would [crosstalk 01:03:32]say that’s my take, is that everybody has got eight months plus or a year plus, sometimes much more than that. Are you seeing the same thing Mindy in our interviews so far?

Mindy:
Well, I would say either eight months or there’s a couple of people who are like, “[inaudible 01:03:48]a month or two.” Because they have-

Scott:
Really? Maybe I’m completely wrong then. Who said that?

Mindy:
Well… Oh, don’t put me on the spot. Who’ve we had recently?

Scott:
I’m completely wrong.

Mindy:
Was it Joe Saul-Sehy, like a month or two?

Scott:
You know [crosstalk 01:04:01]that might be right. Maybe I’m completely wrong.

Mindy:
But we also just started this, the financial scan. It’s only been a few weeks, maybe a few months.

Scott:
I’m completely wrong. You’re right, Joe does have a month [inaudible 01:04:17]. Okay.

Mindy:
But he’s also… I would argue that he is FIRE plus. He is probably fat FIRE plus. Meaning he has all the money that he needs to live a very comfortable… I wouldn’t say lavish but a very comfortable lifestyle and then some. So-

Chelsea:
And his wife still works.

Mindy:
And his wife still works. Oh, that’s very interesting. So is your husband still staying at home?

Chelsea:
He is still a stay-at-home dad.

Mindy:
So that’s very interesting because we don’t have very much in cash at all but I still work and Carl doesn’t but we don’t spend money so it’s okay.

Scott:
No. Fair enough. That makes a lot of sense. Okay. Well, should we move on the famous four?

Mindy:
We should. Okay Chelsea, it is time for the famous four. These are the same question we ask all our guests. What is your favorite finance book?

Chelsea:
Uh, I have to say Art of Money by Bari Tessler is my favorite over all money book. I really like how she ties some of the emotional side of money to actual actionable things. I think sometimes you get those manifesting wealth books and you’re like, “What am I supposed to do? Just sit around and wish for money? That’s not going to and work.” So I really like how she integrates kind of, some of the mindset stuff to actual action. But I also have a soft spot for Intelligent Investor by Benjamin Graham because it got gifted to me as one of my first money books and so I always go back to that one.

Mindy:
Okay. Well-

Scott:
I love the Intelligent Investor. I have not read Art of Money so I have to go check that out. But I just love that bash of the mindset books. Not that there’s anything wrong with it, I just thought it funny.

Chelsea:
It depends on the book but you know what I’m talking about.

Mindy:
Yes.

Scott:
Okay. What was your biggest money mistake?

Chelsea:
Uh, good question. So I think what my biggest money mistake would actually be not doing more of that co-invest that I mentioned earlier. And so at the time when I was working that old job I didn't want too many of my eggs into one basket like to be working there and then to have a lot of my assets invested that way. But one, really unique opportunity to get high returns and two, we could actually leverage that. So they had this super low fee thing so you could 80% leverage… if you were investing your own money. And so I didn't do that for the first several years and I kind of wish I did. I think our net worth would be much larger. That was probably my biggest miss.

Scott:
[inaudible 01:06:43]opportunity cost mistake.

Mindy:
Opportunity costs, yeah. That’s okay that one.

Chelsea:
Gets you every time.

Mindy:
You know what? Ask the employees of Enron how they liked investing all of their eggs in one basket.

Chelsea:
I know. I know.

Mindy:
So-

Chelsea:
I can’t be too upset about it but if I could go back, that’s something I would change.

Mindy:
What is your best piece of advice for people who are just starting out?

Chelsea:
Uh, we talked about this a little bit in the episode. I think it’s really going back and thinking about your relationship with money before you dive in and sometimes… oftentimes especially when people start budgeting and start setting these goals, they’ll tell me like, “Well, I can but every time I try to budget I get stuck or it doesn’t work, or I just can’t budget.” There’s probably some roadblock in there that you’re setting up in your brain that is keeping you from moving forwards. So I think the first thing is really thinking about your relationship with money.

Mindy:
That’s really powerful. I mean, look at how we did it today, all of us. Here is my money block. Wow. That’s a good piece of advice. I like that a lot.

Scott:
Alright. The most difficult question of the famous four, what is your favorite joke to tell at parties?

Chelsea:
This question assumes I go to parties. Especially not in 2020, I’m not in a lot of parties. I don’t have a joke to tell you but I will say that normally I end up telling a funny story about one of my kids, and the most recent one that I have that I’ve been telling people is, my two year old has learned to sing that song Down by the Bay, (singing). But he doesn’t quite get it yet so he comes up with his own thing. So he’ll be like (singing)… and then he just cracks himself up. But he doesn’t understand that it’s supposed to rhyme. [inaudible 01:08:13]words.

Scott:
That’s fantastic.

Mindy:
Two was a super fun age. When they’re talking and they’re making stuff up and they don’t really understand how it works.

Chelsea:
Ah, two is a funny age with the first one who didn’t have the terrible twos. Two is an adventure with our youngest who is a climber and just generally a crazy child.

Mindy:
Well, Scott doesn’t have any kids and he is of the mindset that kids are going to be so easy. So let’s just let him know that he’s 100% right.

Scott:
Can’t wait.

Chelsea:
Absolutely Scott. Don’t worry about it. They sleep through the night right away.

Scott:
That’s right. That’s what I hear.

Mindy:
Yeah. Right away. Three short years.

Scott:
Chelsea, where can people find out more about you?

Chelsea:
So I’m at Smart Money Mamas on all platforms but we run a big annual online summit every year that’s actually coming up in just a little over a week called Mamas Talk Money and Mamas Talk Money we have over 40 incredible speakers including Mindy, that talk about all areas of money from mindset to budgeting and investing through to entrepreneurship and career. It’s a really fun five days and it’s free to attend. So registration for that is open right now at mamastalkmoney.com so come check that out. We’ll have a lot of fun. We’re doing over $10,000 in give aways of financial literacy books and courses and prizes and so it will be good.

Scott:
Awesome. Well, we can link to that in the show notes as well for people who want to find that at biggerpockets.com/moneyshow145. If you want to go check that out.

Mindy:
Yes. That is super awesome. I love that it’s free. And it’s online, right? I don’t have to travel anywhere to get there?

Chelsea:
You don’t have to travel. You don’t have to put your make-up on. You don’t have to get a babysitter. All a lot of great perks and I know that Mindy is cheap and likes that it’s free.

Mindy:
I love that it’s free. When you’re first starting to figure out money, it’s difficult to spend money to have somebody teach you how to save money. Like, “Why would I spend money? That’s so dumb.” This is so easy to just pick and choose which things are interesting to you and watch them. The money mindset, that is so huge. I mean, you can’t change your relationship with money until you’re ready to do it. So get yourself in that mindset.

Chelsea:
It’s also been great for people who… for the same reason Mindy, because it’s such a block to not want to pay money to learn about money, for people to see the community. And so we have a Facebook community that goes with the summit and last year we had just so many mums and so many women talking to each other, seeing that they weren’t alone in some of the things that they were struggling with and having some cool breakthroughs. So yeah, I think it’s a good entry point. And we also have some more advanced stuff for people who’ve been in this community for a while. We have presentations from Jamila Souffrant on FIRE. We’re talking about long term retirement planning and estate planning and career building. All that kind of stuff. So…

Mindy:
Oh, that’s awesome. So if you’re a mum or if you’re not, check that out. Okay Chelsea this was huge. This was so much fun. Thank you so much for coming on the show today. I really appreciate you taking the time out of your day to share all of these things. That whole piece at the beginning about the investment banking thing, that was… I learned a lot just talking to you about that. So, thank you.

Chelsea:
Thank you so much for having me and giving me an opportunity to talk about my last career.

Mindy:
That was awesome.

Scott:
Thank you.

Mindy:
Okay. And good luck at the Mamas Talk Money summit next week. We’ll talk to you soon.

Chelsea:
Talk to you soon.

Mindy:
Bye bye. Okay. That was Chelsea Brandon from Money Smart Mamas and Mamas Talk Money Summit. Scott, what did you think of the show?

Scott:
I thought it was a vivid, energetic, great show where we talked about a lot of things that… I kind of selfishly asked her some questions about equity analysis and bonds stuff because I was just interested in learning about what that meant and what that was. But what I really thought was special about it was her story and her journey with money and her ability… her kind of realization that, “Hey this high income identity job that I’ve got at a hedge fund, which is very prestigious and renowned career, that’s not what is meaningful to me. What’s meaning to me is this work. The work that I’m doing now and my family,” and those types of things. And that’s a transition again that I think is really difficult for a lot of our higher income earning guests to go through.

Mindy:
Yes Scott. I think there’s a lot of takeaways from this episode just for pretty much anybody listening. I mean, when you’re starting your journey, look at what your money story is. The money moment that defined your childhood. That was huge. And kind of a little scary. She probably could have also been a psychologist. But to the high level, the questions that you were asking, I learned a lot today. I didn’t even know what alpha was when you asked that question. Like, “Mm.” I do a lot index fund and real estate and alpha does not apply to my choices in either fund.

Scott:
I was just [inaudible 01:12:53]jargon to try to prove my passive index fund point on my [inaudible 01:12:57], but there we go.

Mindy:
And that was really profound. 80% of these people who work in these hedge funds are investing in index funds because they can’t invest in what they know, they have to go outside and they know how hard it is to learn about all these things. It’s just so much easier to put it in the index funds and over the long haul, kind of the same return. Why do all the work?

Scott:
I thought that was interesting that, “Hey. We’re barred from investing in this and we don’t trust our peers.” It’s kind of what I got from that… I get from that statistic. So-

Mindy:
She didn’t say those words exactly.

Scott:
But… yeah. So anyways should we get out of here on that note Mindy?

Mindy:
We should. From episode 145 of the Bigger Pockets Money Podcast, I am Mindy Jensen and he is Scott Trench and we are out of here with nothing clever to say. Ah, I forgot to do that again. So…

Scott:
No. That’s alright.

Mindy:
Uh, if you have something clever for me to sign off with, email [email protected] or share it in our Facebook group which is found at facebook.com/groups/bpmoney.

Scott:
Yeah. We need one big long list of those so please just… let’s start a thread and get it going there.

Mindy:
Oh, that’s good. Okay. I will start the thread. Please comment. Okay. Talk to you soon. Bye bye.

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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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