BiggerPockets Money Podcast

BiggerPockets Money Podcast 77: Entrepreneuring Your Way to Financial Freedom With Pete Mockaitis

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Pete Mockaitis grew up in the cheapest place to live: Danville, Ill. He watched his mother work her way up the local credit union ladder from teller to CEO, simply by doing more than necessary—repeatedly.

His mother strongly discouraged debt, having seen so many of the credit union’s customers declare bankruptcy and have their entire bank accounts wiped out.

Witnessing firsthand how hustle pays off, he helped his brother with his paper route for a quarter—only to learn his brother was making $1.80.

After high school, he got into college on a full ride scholarship and graduated into his dream job with Bain & Company. He saved money by skipping the little things like taking a cab when he could walk, having roommates instead of living alone, and drinking water instead of ordering drinks when he was out.

Pete’s true calling was entrepreneurship. To prepare for the jump to self-employment, he figured out his burn rate and discovered it was a lot lower than he originally thought. By figuring out how much he was spending and computing the value of his pre- and post-tax time, Pete optimized his path to financial freedom and is now enjoying the fruits of his labor.

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Read the Transcript Here

Scott: Welcome to the BiggerPockets Money podcast. Show number 77 with Pete Mockaitis from the How to be Awesome at Your Job podcast.

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“And then that always just kind of brought me comfort, like, all right, hey Pete, even if you had zero revenue, zero for over 400 days, you wouldn’t be dead broke. And if you weren’t dead broke, you’re not dead. You know, about 14% of people actually have negative networks. It’s okay — no need to panic.”

It’s time for a new American dream, one that doesn’t involve working in a cubicle for 40 years, barely scraping by. Whether you’re looking to get your financial house in order, invest the money you already have or discover new paths for wealth creation. You’re in the right place. This show is for anyone who has money or wants more. This is the BiggerPockets Money podcast.

Scott: How’s it going, everybody? I’m Scott Trench. I’m here with my cohost, Miss Mindy Jensen. How are you doing today, Mindy?

Mindy: Scott, I’m having a great day. How are you doing today?

Scott: I am doing great. You know, I want to jump right into the discussion about how folks can kind of get some takeaways from this podcast. And there’s three, you know, we’re going to talk about this in depth with Pete, who is a fantastic guest, very smart, lots of kind of new thoughts and insights in terms of how to make this whole personal finance thing work. But three kind of actionable tips that I think you should kind of think about seriously doing right now or right after you listen to this podcast, right? When you get home or finish, whenever you have the opportunity. One, compute your daily, weekly, or monthly or some sort of time-based burn rate, the amount of cash that it costs you to fund your lifestyle as it currently exists, and compare that to the amount of savings or liquidity that you’ve got that you’d be willing to spend to fund that lifestyle, right? That’s your financial runway. That’s the amount of time you can survive without a paycheck and still kind of maintain your lifestyle.

Number two, compute the value of your time, both pretax and post-tax. So how much do you earn per hour before tax? How much does that equal after taxes are distributed from that? Moreover, are you doing activities in your life that might, you could maybe hire out that would be much more cost effective for you? Moreover, then the third tip is once you have those two numbers, can you kind of see some inefficiencies in your life? Some ways that you could dramatically increase your financial runway or leverage your time or your money more effectively to help you move towards what really matters in your life? We’re going to get into those concepts in the interview today. But I wanted to kind of hit those home right off the bat so that you had them in mind and we’re thinking about them going into the show.

Mindy: Yeah, that’s a really great point. That is a huge part of today’s episode. And you know, I actually struggle with the concept of hiring it out. So, Pete really has a great way to look at that in a slightly different angle and discover that you know you’re not a bad person for paying somebody to do something for you. If you then use that time to go generate more income than you are paying out in the cost of that service. So that’s a, as a DIY person, it’s really difficult for me to pay somebody to do something that I could do myself. But you know, it’s not always the best choice for me to do it. Before we bring Pete in to explain all of these things in a way better than what I just did, let’s hear notes from today’s show sponsor.

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Mindy: Okay, huge thanks to today’s show sponsor Pete Mockaitis from How to be Awesome at Your Job. Welcome to the BiggerPockets Money podcast. How are you doing today?

Pete: Oh, I’m great, thanks, Mindy. Thanks, Scott. It’s a thrill to be here.

Mindy: I’m super excited to have you. We sent out a preshow questionnaire to all of our guests. And I really liked some of the answers that you said, especially your one about how did you find financial independence. And some of the things that we’re going to be covering today are like, how you grew up knowing about money which is a little different from most of our guests. So, let’s start off with where your journey with money begins, and then I want to know exactly how you discovered financial independence.

Scott: Oh, sure thing. Well, my journey with money begins in my hometown of Danville, Illinois, which fun fact was once named the cheapest place to live in the United States. So that’s cool. And I remember maybe my first money experiences were with my brother who had a paper route and sometimes I would help him out, and he’d pay me a quarter for my assistance. I thought that was pretty cool cause I could get two little Jolly Rancher’s sticks from the nearby market for a quarter until I learned that he was banking about a $1.80 per route. Just so crazy low number, right? How is that legal? And then he sort of made the point, well, hey, I’m sort of bigger and stronger, faster an do more than half the work, and I have to do it every day and used to sort of help out whenever. So, you know, I think it’s, fine. And so, he had the bargaining power and, I learned a lesson when it comes to money and positioning. Yeah, I didn’t do the route as often after that, but I still did from time to time.

That’s probably where it begins. But I think really where it matures is that my mom worked at the credit union in town for teachers, which was kind of funny. So, like all of my teachers were in contact with my mother regularly where they were like depositing their paychecks, which  you know, is good and bad; depending on my behavior in the recent weeks. And so, there were just a lot of great lessons there in terms of, she was kind of spooked about debt because she had seen people, you know, declare bankruptcy, and then just sort of that just wipes away the money in the credit union from the members. And that was kind of spooky for her. So, I was like, note to self, don’t go bankrupt. That’s very bad. That kind of triggered something deep in me, and I’ve been kind of cautious about debt ever since. But I, maybe the positives kind of moved toward lessons she taught me there was, she noticed that the CEO would stay late to vacuum the place and she thought, well that’s kind of odd.

You know, I know how to vacuum. I don’t know why that sort of most senior person should be doing the vacuuming. And so, she volunteered to do the vacuuming, and from that little proactive step she got more and more responsibility, you know, took on some more and more like classes at community college and conferences and training until ultimately, she became a CEO. She rose to prominence to that organization all because she started to volunteer to vacuum. It’s a little bit of proactive noticing and making your boss’s life easier. It was a pretty cool lesson.

Scott: I love that. What, you know, I think that that mentality is not common enough with folks in the workplace, right? Like, isn’t vacuuming beneath anything right? Like that should be

Pete: Sure. You could think of that

Scott: It’s important to do vacuuming, right?

Pete: I think in a fancy degree to vacuum.

Scott: Yeah, No, I think it’s a great piece of advice just generally, like if you’re talking, looking to get ahead, I mean you go back and listen to David Green…

Pete: Oh, yeah

Scott: …on the BiggerPockets Money podcast, I forgot what episode that is. We’ll mention in the second tier

Mindy: It’s the 12th.

Scott: Oh, wow. Mindy’s on the spot with it. Okay, but his episode, he brings that mindset to it and the career ramifications of bringing that to the table, those little extra efforts and the ability for them to generate more opportunity in fast and rapid advancement, just absolutely astonishing.

Pete: Absolutely.

Mindy: Well, and she’s not cleaning toilets with her own toothbrush

Pete: All right!

Mindy: Vacuuming the floor, how gross is the floor?

Pete: Right?

Scott: Especially if it’s vacuumed daily. You know, you can’t keep late too much.

Mindy: Exactly. And how big is this space? She’s not vacuuming 25,000 square feet of floor. She’s vacuuming, you know, a fairly small portion. Yeah, it sucks. But look at what her boss, oh God. I quit. I’m done. and from episode 77 but vacuuming the floor isn’t like somebody’s life dream probably, but it doesn’t take that much time. It’s not that difficult. It’s not that gross. So, your boss notices and some people will say that it’s a suckup maneuver. Oh God, I’m trying to, I’m out. Goodbye. No, that’s not fantastic. It’s horrible.

Scott: The cleaning house of the vacuum jokes.

Mindy: Oh God, Oh, this is going to be the worst episode ever. And it was going to be good too, Pete’s really smart. No, I was trying to say, you know, kiss up there. You go kiss up to your boss. You’re not really kissing up to your boss. You’re doing something that needs to be done. And I think a lot of people might stop themselves from, from volunteering this, oh, I don’t want to look like kiss up. I’m not going to say the vacuum words anymore, and it’s not that, you know, David Green asked his boss, what is your pain point? What do you hate? And she said I hate that there’s spots on my glasses. Well, I’ve been a waitress. You know what? You have a lot of downtime, especially when you first get there. So, you can stand around, or you can wipe glasses and stand around. If you’re wiping glasses and your boss is happy about that. I just don’t see why some people call it sucking up. You’re helping your boss. You know what you want your boss to like you. Let me tell you how much it stinks to have your boss not like you. Yeah, I didn’t say sucks.

Scott: Certainly.

Pete: Yeah, and I think maybe if they think it’s sort of kissing up, I think that’s maybe just sort of rationalization for, you know, I’m not doing that, and maybe I should be. And I kind of feel a little, I don’t know, maybe bad or lazy that I’m not hustling. So that’s another way to relieve that cognitive dissonance is, and be like, yeah, that person’s kissing up. Yeah. I don’t want to be like them. So, you know, but I think you’ve got a great logical, you know, to become a problem.

Scott: So how did these lessons you learned growing up translate into your approach to early financial freedom?

Pete: Oh, sure thing. Well, you know, some of them were, were semiagainst my will, I guess. Like, so for instance, with the death story, I fell in love with Duke University. You know, I thought, oh my gosh, this is just the place. This is the campus; this is the vibe. It’s so cool. But all of my family went to the University of Illinois, which is about 40 minutes away from where I grew up, which is a great school. You know, US News, top 50, all that. But I was just like, yeah, I don’t know. I’ve been there a few times; it isn’t really speaking to me. I don’t know. And so that was the one time my mom, and I kind of tussled a bit. We sort of were, had, you know, great. Got along very well.

But there, there was a little bit of sun mother turbulence. And in fact, I even got a full tuition scholarship to the University of Illinois at. And I originally hid it from my mom because I thought, well that’s going to be difficult to have the conversation. Like I know I have a free tuition, but I don’t want to, I want to go somewhere else. But ultimately, I came around and said, you know what, I met some cool people there, there’s some cool activities there and I grew to love it. So, I was very pleased I went there; mom was correct. University of Illinois is a great choice, and it was awesome to exit without any debt associated with college. And we talk about the initiative. I also kind of discovered this industry called strategy consulting, which I thought seemed like the coolest thing ever. And, I was hungry to sort of from day one of college, they could be in proactive. I thought, all right, I want to end up at McKinsey Bain or the Boston Consulting Group, and I’m done with this. And so, I sort of planned my extracurricular and my practice of what’s it called, the case interview to accomplish that. And then it was really cool how when I got my internship at Bain; I saw a letter with the other interns. And so, we also had some folks from Northwestern and Duke. It was like, Oh, I didn’t go to Duke, and I’m in the same career place without having to pay a bunch of debt. This is awesome.

Scott: I love it. And by the way, just for everyone listening, this speaks to an incredible track record of success academically throughout high school, college, and then to get an employment offer with Bain out of college is outstanding. Right? You’ve been the top student in the class interviewed well, all that kind of stuff.

Pete: Oh, well, thank you. Yeah, it is. It’s pretty competitive. And in terms of the applicants versus the offers.

Scott: So, using that great opportunity out of college, how did you then pursue early financial freedom?

Pete: Oh, sure thing. Well, you know, it’s funny, so I always, I grew up frugal, you know, in terms of, you know, my parents would say if we went out, you know, which is somewhat rare and usually was to ,like, a fast food place, you know, it’s like we’re not going to buy a beverage. We have beverages at home. It was like, okay. And that was just sort of like the norm. And so, I would be, I would order water, you know, just sort of like instinctively in most places I much preferred the house parties when available amongst my Bain colleagues as opposed to go into the fancy club with the fancy cocktails. And this is before UberX was really kind of up and running. But, if I had to choose between a cab fare, which is pretty pricey, or a busser, just a longer walk, I would almost always choose to walk. And sometimes my colleagues there would tease me a little bit like, you know, we make a lot of money, right? It’s not really necessary for you to ride the bus then. And he also had two roommates, and then three roommates and the apartment which I lived at, which was, which is awesome. So, sure enough, I was able to do a whole boatload of savings because I had a hunch that the next step for me was going to be something entrepreneurial. I had a Jones to do some, you know, speaking, writing people development stuff. And I had a great mentor who said, well, peach saved some of that Bain money because that’s probably going to take a year plus before you really up and running with that. And I said, okay, thank you, sir. And so, I did just that.

Scott: So how long did it take you to save up a year of expenses?

Pete: Yeah, you know, it just under three years is the length of time. And so was funny cause I remember thinking that’s a boy, they’re paying me plenty here. And in fact, I might’ve been the only person who thought this at the time, but I said, you know what, I’d be cool if they just like paid me half and made me work half as much, you know, cause I got all this extra money and people sort of thought that was odd. But that’s because they were living in their shnazzy I guess. A fancier maybe one bedroom, you know, right near the river and the beauty and I was a little bit more north by Wrigley Field-ish.

.

Scott: Love it. So, walking through that, I mean you save up for these three years, you get a year’s worth of expenses lined up. I assume that in an area that you can access them and then you do what?

Pete: Well then, I took the leap, you know, and I probably should’ve had a better plan or had a little bit of a side hustle go at first. But in a way with the, at the consulting firms, it’s, it’s sort of regimented in terms of like the timelines. It’s sort of like, okay, hey, it’s been about three years, or what do you thinking? thinking business school, you know, where do you want to be? And I said you know, why don’t think I’m going to take a crack at this, a speaker, author, people development thing. And so that’s what I went and did and it was funny, I kind of floundered for a little bit because I think I may be drank too much KoolAid when it comes to the follow your dreams, follow your passion. I was like, yeah, I’ve got to do that, you know? And it’s like, well wait a second. You know, it’s all the rules of business still apply. Like they’re our customers who needs a purchase an offering from you that solves a problem or is superior in some way to the competitors.

And so just because it’s your passion to, you know, be on stage and speak or write, it doesn’t actually mean it’s going to get you paid. Some passions get you paid, and some passions don’t. And so that was very informative for me as I kind of floundered a little bit. Like, I’ll talk to anybody about anything, you know, I could do my research and make some slides and look great. And then I kind of really zeroed in over time. It was like, you know what really, it’s sort of about the universal skills and the speaking and the thinking that’s working out. And so, what sort of saved my bacon as my money was, you know, declining a little bit is I sort of plugged in with another guy who was offering a case interview coaching for aspiring management consultants. I was like, Oh, this works for me. It’s people development, and it’s something I know, and I could sort of fit it in, in between speaking gigs. And it was awesome. So that’s kind of how that worked out.

I had, I often freaked out like, oh my gosh, am I going to run out of money? I don’t have a paycheck the way I used to. But what I did was bake a spreadsheet that kind of laid out, okay, here are all my assets, here’s how quickly I’m spending money on dollars per day basis. And then that always just kind of brought me comfort. Like, all right, hey Pete, even if you had zero revenue, zero for over 400 days, you wouldn’t be dead broke. And if you were dead broke, you’re not dead. You know, about 14% of people actually have a negative net worth it’s okay, no need to panic.

Scott: So, I think that that’s a great outlook, right. And I think the fact that you saved a lot of money and likely had a fairly low cost of living kind of enabled some of that comfort for you to keep it. When you put together that spreadsheet and did all that work, what did that timeline look like in terms of getting your business to a point where you thought, hey, great, now this can be sustainable and grow long term. And I’m not looking for the amount of runway I’ve got left before I run out of money, but now I’m looking for, hey, this is going to work and how do I grow it?

Pete: Sure thing. Well, you know, it took a while and I think that it could have gone faster if I were smarter in terms of, you know, like your wise guests would suggest you do a little bit of a side hustle and you learn and you get some traction. You find product market that, you know, some of those, sort of, smart things. It could have been much less painful for me. But no, I’d say my first year I had around $8,000 of revenue.  and my second year was around 35,000, and then my third year it’s like we were kind of making the net worth go up again as opposed to down and so and so that was, I think maybe like 65 plus. And so then, and it’s been a growing healthy place from there and I could have not dropped so low, did a little bit more proactive and clear on what am I offering and what’s distinctive and, and getting a little bit of traction before I left the conference of my paychecks

Scott: And, it sounds like those are skills that one could have developed at Bain.

Pete: You know, it’s only a good, it’s like, I was like, wait a minute, all of these rules apply. I just got to get up my spreadsheet and do what I do, and that helped

Scott: love it. I just do, it’s a funny kind of revelation. It’s like that’s what, yeah, that’s skill set. Perfectly applied and then helped you kind of boost distinct to the next level. It sounds like.

Pete: You know, it really did and that’s kind of what I chose that profession originally cause it’s like, I don’t know for sure what I want to do, but I did walk away pretty convinced that if I start strategy consulting I’ll have some skills and some bank role and some network and that can help me with whatever I want to do next. From starting a nonprofit to, you know, work in private equity or any number of options. It seemed like a nice, flexible move.

Scott: Awesome. So, what year did you leave the job and what year did you get to that kind of $65,000 mark in revenue where it was sustainable?

Scott: Sure thing. It was, it was about 2009 when I departed, and it was 2012 when things were feeling all right.

Mindy: You quit a job in 2009 did you know there was a big recession going on?

Pete: Yeah, but I was following my passion, maybe.

Mindy: Okay, so knowing what you know now, would you have gone back and done that again in 2009 or would you maybe have altered your timeline a little bit?

Pete: I would be okay with the timeline. I would just be a much smarter about getting clear about, okay, what’s the product, what’s the offering the customer, how am I distinctive? Like just those fundamental things as opposed to having to go speak. It’ll be fine. I think that was pretty naive of me.

Mindy: Okay. I want you to go over those again. Who’s the customer? I wanted to write that down because that is, I think that’s really important when you’re going to be starting a company, and especially if you’re leaving your company, you need to have a really clear goal of what you’re really clear idea of what you’re going to do. And I’m not here to tell you that you did everything wrong because clearly, you did not, even though you did quit your job at literally the worst time. I have a daughter who was born in 2009, and her classroom size is actually shrunk, and they attribute that to the recession had been going on for like a year and a half or so at that time, and people weren’t having babies. So, I think that’s really interesting that that’s when you just up and quit on your job.

Pete: Yeah, that’s kind of how the timing worked. It’s like I graduate 2006 it’s about a threeish year role unless you are going for the next level. And so, there we are landing right there.

Mindy: Okay, so how are we, who are your customer is and how to find them and like all that defining stuff, let’s start from there.

Pete: Oh, sure thing. Well, I think fundamentally when you start a business, if fundamentally someone who’s going to part with money for what you have, you know, you have your product or service that they want more than they want, their money and they’re going to sort of choose you. If in fact, you are delivering, you know, something that’s worthwhile, it’s solving a pain point or a problem, and it’s a find option relative to a competition. And so, what I find interesting in the realm of speaking, you know, even though it might seem a little bit fuzzy, it’s like, you know, your product is like a speech or a performance. And I thought, yeah, I’ve seen a lot of people speak, and I think I speak pretty well. I’ve got some amazing evaluations. They, I was like the best at a conference or whatever, so that’s all I’ll need. Right? It was like, well, no, no, not quite. You know, it’s sort of like we need to see that in that realm. In that case, like you have a expertise to offer in terms of Oh folks are going to walk away, transformed some new knowledge to be better able to do their jobs or you are exceptionally entertaining. It’s more like a comedy show really, you know, then like a, you don’t educational experience, or you are just famous.

Scott: All right, so if you’re looking back at yourself or if you’re giving advice to somebody who’s trying to kind of go through this entrepreneurial route and maybe has some money saved and is thinking about exploring that, what would kind of be some highlevel advice that you would give outside of knowing your customer and knowing how to deliver a competitive product?

Pete: Oh, sure thing. Well I think that the savings is key, and one thing is I would just recommend that you, then you’d be smart about your savings, that they are in an accessible place as you mentioned, like if they’re tied up at your 401k then you know they’re going to have penalties associated with accessing them. So, you want to make sure that it’s good and accessible and it’s not in a sort of a highly volatile place so that it doesn’t dip right when you need it. So those are some fundamentals there. And then I would get real and quantitative, associated with, all right, what are all your expenses in terms of like recurring, like your cell phone.

Maybe you’re going to have to buy your own health insurance, which is way pricier nowadays. Are you going to have to, you know, get that car, rent, etc.? All of those things. And I found it very useful to break those down into a dollars per day basis because some things I might buy weekly, like groceries and some things I might buy, you know, monthly like a, you know, cell phone bill and I got really clear on, okay, this is what it adds up to. And then here’s how much fun money I have left so that I’m not sort of going, going nuts. And that was just so handy in terms of there’s clear math that I just cannot argue with as long as I don’t just go nuts. Like you know what vacationing all across Europe is what has happening now for three months. It as long as I kind of keep things sort of normal, then the those numbers will hold and I had several check-ins from time to time and then that was just very reassuring in terms of like I’m not going to go completely broke if I do, I’m not going to be dead because I think that we have it hardwired, especially if you’re listening to the bigger pockets when you podcasts, like you’d love watching your net worth go up and not down and when it’s going down, that’s freaky. It was like this is not how it should be.

I am very uncomfortable with this, and there’s almost like a biochemical cortisol reaction inside of you like I cannot endure this. I might be traumatizing a bit, but sometimes that’s how it felt, you know? But when I had that all in black and white, and then if you check in, it’s like say hey Pete, 20 days ago, you know you had 380 days of cash remaining and now, Hey, it’s 20 days later, and you got 370 days of cash remaining. So, it’s, it’s even more conservative than it says it is because you have some revenue coming in. And so, take a breath, and we’re going to kind of pull out of this thing. I kind of imagine like a jet, it’s going down, but not for long. You know, we’re correcting and Rebecca, and it’s all good.

Scott: I love it. It’s not you, you know, I feel like people are very afraid to take the plunge to go in and do something entrepreneurial or on their own, even when they’ve probably got a position that’s way stronger than they need because of that concept of you’re getting control of your spending, you have a long period of time to figure out how to make something work if you’re smart about it. I think so. I think that’s, that’s good advice.

Pete: Oh, thank you. And I think that’s, and it could be the aisle, you can go the other side of that too. You know, in terms of this is just what I want to do and I’m sticking my job, I’m doing my own thing and boom, well if you don’t have that savings and a clear picture of how it’s going to go, you know, that could be troublesome. So, I guess, and a lot of this, there’s sort of that sort of why wise middle way to not be rash and to not be scary cat and just to sort of be logically wisely bold.

Scott: Well, it seems like there’s two components to this. One is the savings that you have and your burn rate, right? So how much time you have before you run out of money. And the second is you are revenue generation. So, what would your advice for someone who’s out in this on terms of how they should deploy their time such as they can in building revenue?

Pete: Oh, Scott, this is one of my favorite things to talk about actually. I am all about thinking about the value of your hour in terms of real dollars. And so, you can, you can do this with your existing job at by, but a quick calculation, an excel like, okay, what’s my salary? What was the cash I had my benefits, what am I taxes and how many hours do I have to spend at this job in a year? Divide and boom, and you’ll, they’ll tell you something meaningful. Maybe it’s 20 bucks an hour; maybe it’s 60 bucks an hour. And then so many decisions get easier in terms of, I should like to buy some help here on this, you know, property. Should I invest in some assistance on my website, or should I do it myself? I had Michael Hyatt as a podcast guest recently, and he’s so awesome. And he made a point with someone who said, you know, I kind of know how to make websites.

So, you know, I figured that I’m going to be able to pull it off and just do it myself. And it says, okay, so now how much do you normally make a, you know, with your coaching it’s like a hundred bucks an hour. It’s like, okay, and how much would it a higher to cost to pay someone who’s really awesome at websites is I got maybe $50 an hour. It’s like, so you’re going to pay some guy who’s not that good at websites, a hundred bucks an hour to do your website yourself. And so, he’s like, oh. So that has really been eyeopening for me. Like I’ve had times where I was doing coaching sessions, and you know, I was running over a hundred dollars an hour for these coaching sessions, and I might have 11 in a day, you know, during some busy months. And it was like, I don’t know when I could do my laundry. And so, it’s like, am I going to do fewer coaching sessions in order to do my laundry? And I actually hired someone to come into my home and to do my laundry even though I’m working from home. And in a way on one side that sounds nuts. This guy is working from home. He’s hired so much to do his laundry. That’s weird about the other hand. It’s like that would free up. I could pay less than one hour’s worth of work to have four hours of laundry done. It was a threehour, threeweek buildup that did a bunch of machines and basement there and then I could do more and have my laundry done immaculately. And it’s like, it’s like win-win.

So, that’s how I think about it is look at your potential initiatives of your business and see, hey, you know, what are the odds that this thing’s going to be successful? Maybe put a percentage probability, how much money would that generate or save, and how much time will that take be in? But I find so striking about this exercise; I have a quick little spreadsheet for this, is that sometimes on the surface you got two pathways that seem, you know, oh man, how could you pay or be? And they’re probably like, you know, similar ish. But then you spend like five minutes putting them through some numbers. You’re like, holy crap. B is worth 10 times as much in expected wealth generated for our invested.  let’s do B first.

Mindy: You know, this is something that I really struggle with, and I’m glad you put numbers to it and gave a quick way to figure it out. I hate cleaning my house. It is totally not the FI way to hire somebody to do anything for you. You all have, I’m a healthy woman. I have two strong arms and two strong wigs, and I could do it myself, but I hate it. There’s other things that I love that I wouldn’t want to hire out but doing this exercise to see how much it costs me versus how much I could be making if I was using that time to do something else has me thinking that perhaps I should go look and price out house cleaning services.

Pete: Well absolutely and I think about it, the hourly rate so much in terms of like would you spend, if you were to move an hour away from housecleaning, could you spend that in, in wealth creation activities and would that, you know, create a substantial amount of wealth. And because of something like house cleaning, you may be able to find at $14 an hour with a little bit of savvy, shopping around.  whereas I find a harder time, you know, finding a good handyman or you know, that that may be 50, 60, 70, $80 an hour. And so, I more often will choose like, okay, I’m going to learn how to use this power tool and to get it done myself as opposed to cleaning thing, which you may find it can outsource it for a fifth of the price.

Mindy: Yeah. And that’s, you know, I think a lot of people in the FI community in this FI are on the FI path. I have a hard time paying for something that they can do themselves. And I’ve heard it many times explained, oh, you should just calculate the amount of time it takes you versus how much money you could be making. Well, would I be making more money? Maybe not. But this morning I drove into work, and my husband joined me because he’s taken the little girl to the zoo and he’s like, oh, what if we did this? I’m like, oh my goodness, I don’t have time to do that, but I have to clean my house every flipping week and really every day because my children are pigs, but I have to clean my house. So, if I took that away, I would have, let’s be honest, I’m spending way more than an hour cleaning my house. I now have that time to generate, you know, start up a business that could go much further, you know? But I don’t have the time to even think about it right now.

Pete: Or You, you might think about that time if you’re about as away. I think about it in terms of the assets. Like I am buying an hour, and I am selling an hour. It’s like I’m just a trader. It’s like I’m open for business. You know, I will buy an hour and hopefully a low price of maybe 20 bucks or less. I particularly like buying hours in the Philippines. That’s a whole other conversation, and I will sell an hour and maybe 120 a $200 an hour. And so if I have more opportunities to buy hours that I can then sell, then I think it’s just like a brilliant arbitrage move that financial savings enthusiasts, I mean if they had the opportunity to buy a stock at $20 an hour or $20 a share I guess, and then resell that stock, you know, same day or next day for $120 a share, they would say you’re a moron too to not buy that.

And so, I think that’s how I like to think about it. Money is, and time is, as they say, time is money, and it really is true. More so for me, you know, because I can sort of open my calendar up for Hey, more or fewer coaching sessions. But I think it’s true for all of us in so far as there are all kinds of things, we could be doing that might just save, save money. For example, if you just don’t have the time or energy to shop around for lower insurance, you’re like, oh my gosh, that sounds like such a headache. Although that’d probably be a win and it’s like you could say, okay, okay for today I’m going to hire someone to clean my house for three hours, and I’m going to spend that three hours trying to find lower insurance rates, and so you may discover that you’re, your insurance savings dwarves the cost of your home cleaning. You got to clean home, you’re coming out ahead on, on the money side of things and you just feel awesome because you’re basking in your clean home with extra money and feeling smart about your insurance.

Scott: I love this concept, and I definitely apply this to my own life. I think, you know, on a side tangent, this is a very powerful part of real estate investing in particular because you know, a real estate investor can do the work themselves. If they earn a very little dollar amount per hour at stake at their portfolio off the ground and then hire it out as their portfolio grows and their time becomes more valuable over an investing time escape timeline. In that context or in the concept of investing, how do you think about it when you have, hey, here’s how much dollars per hour I earn with my time, but then I’m also layering in the income generated by assets in terms of my value of my time as well as I become wealthier. So, do you have a way to factor that in?

Pete: You know, it’s, I’ve, I’ve played this a lot of ways and the way I think at the end of the day, your numbers are telling you something and sometimes I think like we could make an assumption, hey that all of the time I have left on this earth is equal in value to all of the, the wealth that I expect to have generated from this asset base. And so that’s Kind of trippy too. It’s a ponder and I, you may very well disagree with that sort of fundamental assertion, but that gives you one estimate of a dollar per hour ratio. What I like more so is what am I actually earning right now from my labors and then the money that you’re earning sort of passively is just kind of there to be a joy to be invested because unless you have the ability to amp up and increase that amount of passive income by doing some active stuff up front and seeding those assets.

Scott: Got It.

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Scott: Okay, so now, now, the next question I have here is in terms of taxes. So, if I earn $30 an hour right after taxes and I’m going to hire something out for $25 an hour, that spread is probably too close, is that it doesn’t make sense because I’m, my taxable income is getting shaved by 30% or whatever. So do you take a discount based on your expected tax liability from your earnings? You know, when your calculation,

Pete: Well, you know, I think you just want to try to be apples to apples as you think about this, you know, in terms of am I spending aftertax dollars to enjoy after tax hours? You know, in terms of like, like leisure, if you will, or am I spending pretax dollars on pretax hours? So, for example, that if I did some coaching work, you know, hey, that’s revenue, but then that will be taxed. But likewise, if I paid someone to do my website updates, then that is also, you know, a business expense, which is, it’s just pretax there. So that’s just how we think about it. Just make sure that we’re, we’re on the same basis to be fair.

Scott: Oh, very simple and beautiful explanation.

Pete: Thank you

Mindy: Pete, one of the things I think that’s kind of awesome about the way you’re approaching this is you’re so analytical, you’re so numbers driven. You took a shot; you saved up, you spend as little, as you spend very little, you optimize the value of your time, you optimize your, your runway, your, you think like a business person. Isn’t that like a strange quality? Like how should, how should I feel about that if I am not as analytical or not? As you know, up all out-optimization mindset. My mindset driven is you,

Pete: Well, it’s definitely strange, and so I’ll give you that. You know, one time I was buying a pillow, and I didn’t have much money. I was in college, I had like 300 bucks to my name is like, is this really a worthwhile investment? If I think about how I currently have a poor pillow and the value of my enhanced sleep quality and yet the cost of this pillow. And so, I was like, oh my gosh, Pete, you’re stressing me out. So, I’m sorry about that. So, I, it’s true. I’m kind of wired to think that way. And consulting kind of just, you know, crank that up a little bit. well, I guess that’s what I think is, I was at the end of the day, you know, you make your own money choices that really work for you. And I think Mindy, when she is on my podcast. Thank you, Mindy. I think she said that so well with regard to is like, I don’t care what people think about this. And I think that’s really the best way to play it is that, you know, everyone’s going to have a money opinion for themselves and for you, you know, they might think that you’re, you’re crazy for doing live in flips. Like, oh my gosh, how could you live in those dumps, you know? Oh, how could you expose your children to that was like, it’s like, okay, now we’re getting a little judgy. Like, excuse me. so they’re going to do that and others will be like, oh my gosh, that is so brilliant and didn’t even know you could do that. You’re going to be, you know, creating so much wealth by a, by doing so and likewise, you know, that’s for every decision. So, we have been, we have not had a car in Chicago for 13 years that I’ve lived here, got married and got now two kids under two. A car is probably on the way shortly live right near the train. And so, I was a little bit embarrassed actually be like, yeah, you know, we still don’t have that car. Whereas we tried to find the one that works great with all these criteria and we haven’t really been out and about shopping for it. Kind of busy with these ghettos. And then someone said to me, well what do you need a car for your, you’re right by the train station. And I was like, wow. I thought I was weird for not having a car. I think it’s weird to get a car and it’s just like, you know what? You can’t please everybody. It’s not even worth trying. So, I just sort of think about, you know, what do you value and how do you think about it? What are your goals and do your thing, and some people will love it, some people will hate it, but most people are just more consumed with their own lives and money to take care of? In my experience.

Scott: Oh it, yeah, I mean it’s about what you want and I think it’s, I think the rear quality is not so much the analytical, hey, I’m going to optimize my time, I’m going to have a very clear understanding of my daily run rate for cash expenditure, that those sorts of things. I think the more rare thing is like I have a clear understanding of exactly what I want

Pete: All right

Mindy: and like that is the piece that’s missing I think from a lot of folks. And once you have that, financial freedom is a very powerful tool to help you get there and optimizing all fronts can be kind of a no brainer, obvious choice and moving towards that and not weird at all. Or if people call it weird, too bad, you’re working towards what you want.

Pete: Absolutely. And I think that’s a great point with regard to being clear on what you wanted and because I am in fact making less money now than I would be making if I stuck to the consulting route. Like, all right, hey, let’s be manager partner by now. Hey Baby. And so, in a way, you know, I think about that, it’s like, oh my gosh, I could have so much money if I had done that. But at the flip side, it’s like, you know, but I would also be working a lot more, and I’d be doing activities that I’m less into than what I’m doing. I would have less kind of control and flexibility over my schedule, and I wouldn’t have met all these really cool people that I’m meeting and doing my thing. And a lot of my expenses are now tax deductible, which is really cool. So, I genuinely feel wealthier now. And then I would in a world in which I didn’t have, you know, much time to spend on the things that are really important to me. Even though if we compare bank accounts to, you know, my bank colleagues who’s remained, theirs are larger at the moment.

Mindy: No, they’re not.

Pete: Oh

Mindy: They have more coming in, but they also have way more going out.

Pete: That’s true.

Mindy: Fine line number is probably going to be significantly lower than yours. Especially if they’re living, they’re renting instead of owning. Don’t you have a house hack?

Pete: Oh, sure do. Yeah.

Mindy: How much of your mortgage payment are you paying every month?

Pete: Oh, well, you know, it’s awesome. We are paying about negative $130 for our domicile.

Mindy: Okay. So, 0% of your mortgage payment comes out of your pocket. I’m at 100% of their rent comes out of their pocket. I bet 100% of their mortgage payment comes out of their pocket and their car payment and their vacations and their fancy cell phone and their cars and Yada, Yada, Yada. And I don’t wish to cast aspersions upon you, but you’re wearing a tee shirt to work. Could you wear a tee shirt to work at Bain and that’s the best tee shirt ever, by the way, I have one, and it’s super awesome. But could you wear that to bane?

Pete: It only had the rarest of days.

Mindy: Yes. Sundays

Pete: If you zing weekend work?

Mindy: Yeah, No. Do you work on the weekends right now?

Pete: Most weekends I don’t, but from time to time when I have a really cool opportunity, and there’s some urgency or, or I was having too much fun with the kids during the weekday, then I will kind of makeup for some lost time on a Saturday. But most of the time, no.

Mindy: Hey, I read the firm by John Grisham. I know 120 hours means you work on Saturday and Sunday and Bain is one of those John Grisham firms, right? Like not really, but probably not owned by the mob. Maybe I shouldn’t go that way. I don’t know.

Pete: What’s a full day? Well, they said, they said to expect an average of 55 to 60 hours of work a week, which is a whole lot more than 40. And that average I’ve learned also I think includes that some weeks you’re, you’re unstaffed, which is kind of cool. You’re paying to not do much. But those zeros right, are being offset by even more than 60-hour weeks elsewhere. So

Mindy: 70, 80, 120.

Pete: So, I did have a few 80 plus hour weeks, and those were exhausting. And if you happen to really be enjoying it like you’re so interested in the case, then, then that’s cool. But sometimes you’re not, then that’s, that’s not pleasant to be spending more time on something that you’re not into. But so, you know, there’s a lot of pros and cons. That’s my official opinion is like, you know, those intense careers in like big law or strategy consulting are often a great place to start a career. But for many, not a great place to end the career if you want to do other things outside of work with Gusto. So that’s one man’s opinion. Others, others getting really into it and are lifers and have no regrets. So, you know, as long as they’re doing what they really want to do in that what works for their values, then you know. Right on

Mindy: Yeah. I don’t think those people are listening to this show, but I welcome that. If you know somebody who’s working 120 hours a week, let them listen to this show. So, I want to cover one more thing before we make it to the famous four. You said that when I was on your show, I said, oh, I just don’t care what people think. And you know, that’s a great position to be in if I do say so myself. But it’s also taken me a while to get to that point. I have a 12-year-old daughter who is now currently, you know, oh, what do people think of me? And I’m like, who cares? But you know, being my age and saying who cares is very different from when you’re 12 years old and saying, who cares? And there’s this like so spot on. Wait, but why cartoon where it says what you think people are doing and it’s you standing in the middle surrounded by people. And I’ll link to this in the show notes, which can be found at biggerpockets.com/money show 77 it’s you. It’s like a stick person standing in the middle. It’s surrounded by all these people who are like, Ooh, let me look at him. Let me look at him. Followed by what’s actually happening is you standing there and everybody else is looking at their phones

Pete: Right

Mindy: Nobody cares. Like ultimately the people who said, wow, you don’t have a a car. Ultimately, it’s not going to change their life if you get one or don’t get one. So, do what’s best for you.

Pete: Right on.

Mindy: Step down from my soap box. Okay. It is time now for the famous four questions. These are the same four questions that we ask of all of our guests. I’m sorry, four questions and a command. Are you ready?

Pete: I’m fired up.

Mindy: What is your favorite finance book?

Pete: You know, you just had them on, and it was a Ramit Sethi’s. I will teach you to be rich. I read it shortly after it came out and it really opened my eyes to automation and some of that concept of as he put it to ’em mercilessly cut what you don’t care about and then lavishly spend on, on what you do, you know, made me feel fine about, you know, lattes or whatever and making my choices. That worked for me.

Mindy: Yeah, that’s a great book. And that episode was episode 73 of the BiggerPockets Money podcast. That was a lot of fun. It was nice to talk to her and meet.

Scott: All right. What was your biggest money mistake?

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

Mindy: oh

Pete: So, I feel real dumb on two levels. Like understand what you’re putting your money into is a pretty basic, but a, I got seduced by, Oh, this is a clever opportunity we’ve discovered that others don’t know about.

Scott: Well, it sounds like it’s a Chinese fruit juice company in a different kind of day in there. Yeah, it’s, it’s the whole gambling trying to tend to speculatively make a cut a couple of quick bucks on some things when there’s a time risk included in that as well.

Pete: hum

Mindy: Yeah. Well, don’t beat yourself up too much about that because you only lost $30,000. There are lots of people who lost significantly more doing things that they don’t really understand and you know, shameless plug for bigger pockets. That’s kind of why bigger pockets exists. We want to help people learn how to invest in real estate, so they aren’t making these silly decisions such as renting to a professional tenant or you know, not doing a background check or trusting their gut when it came to renting. Oh, they said they were, you know, they seemed really nice. Yeah, they always seem really nice until they stopped paying the rent. Okay. Again, stepping down from my soapbox, what is your best piece of advice for people who are just starting out?

Pete: Wait, we kind of covered it, but I, I would recommend that you take, you know, even just three minutes a right now and get a rough sense on what is that dollars per hour number and that will just begin illuminating all sorts of things in terms of, wait a minute, why am I doing this and not paying us? I’m going to do this and why am I paying for this and not doing it myself. I think you’ll; you’ll have some Aha moments on both sides of that coin once you’re clear on the number.

Scott: I think that’s great advice and I’m going to; I’m going to mention that the intro as well.

Pete: Well, thank you.

Scott: All right. What is your favorite joke to tell at parties?

Pete: Well, you know what, this is a tricky one, and I know you’re fond of the puns and so

Mindy: You, kind of, just already did it with all those vacuum cleaner jokes in the beginning

Pete: And So, I, I’m, these might have even come up. I’m not positive. So, there’s a couple, here we go. What does a house houseware?

Scott: I don’t know.

Mindy: Why does the hath wear?

Pete: A dress

Scott: Oh, nice. Nice.

Mindy: And your kids are under two

Pete: That’s right.

Scott: My dad sent me a joke the day. He said why? Why couldn’t the bicycle stand up? It was too tired. And your fouryearold said it has a bicycle audit that says I’m too tired. So, oh, wow. Well at fouryearold laughter, can I come up with some better stuff?

Mindy: What do you mean you wear a shirt with that joke on it?

Pete: I’ve already got it, right?

Scott: He gave me that shirt, didn’t he?

Mindy: Ah, okay. Pete, tell me where people can find out more about you.

Pete: Oh, sure thing. Well, well my epicenter headquarters is [email protected], but probably the fastest way to get there and your podcast app is just to search awesome space job, and you’ll see we got a ton of great stuff for, for folks who are looking to sharpen the skills required to flourish at work. We had Mindy on. And yeah, we’d love to hear from you there.

Mindy: Yeah, that was a really fun show. That was a little different than some of the other podcast episodes that I normally do and I really, I really enjoyed as a podcast, or I really enjoyed your level of preparation

Pete: Well, thank you

Mindy: And you can see if you’re a podcast or you can see his level of preparation when you speak at podcast movement this year

Pete: Yes wow, that’s right I’m excited

Mindy: with another former guest. Aren’t you doing it with rich Jones?

Pete: That’s right. Rich Jones and I were, we’re speaking together at podcast movement. It’ll be a fun one.

Mindy: So rich was on episode 56 of our podcast.

Pete: You’re good with those episode numbers.

Scott: Yeah.

Mindy: You know what? I have a lot of space in my brain. There’s some things in there that I don’t have that some other people do like the ability to instantly do math. Okay. Pete Mockaitis from how to be awesome at your job podcast. Thank you so much for coming on the show today. I really enjoyed this. I really, you know, I need permission to pay somebody to clean my house, and I feel much better with your explanation of how to go through and just figure out how much money you’re making, how much money you could be making if you weren’t cleaning your house with just something you hate. So thank you. I personally got a lot of out of it, and I hope that our listeners do too. I know they will. This was a great show. Thank you.

Pete: Oh, thanks, Mindy. Thanks, Scott. It’s been a lot of fun.

Mindy: Okay, and we’ll talk to you soon.

Scott: All right. That was Pete Mockaitis from the how to be awesome at your job podcast. Mindy, what’d you think?

Mindy: My biggest takeaway from this episode is just it’s okay to hire it out and that, like I said at the beginning, that’s really difficult for me sometimes because I can do it myself. Why on Earth would I pay somebody? Well, because there are other ways for me to generate money besides just being here. No offense that I could do if I didn’t have these stupid cleaning my house tasks all the time. And I’m not like Pete; I’m not going to hire anybody to wash my clothes. I think that’s weird, but I guess I am judging him, but I’m not really judging him. Like if he wants somebody else touching his underpants, that’s fine. I don’t want anybody else touching my underpants. So that’s kind of a weird thing for me. But I also don’t mind doing laundry, but I really hate cleaning my house. And this is, you know, the way he explained it was really, really, really great and there’s so many things that you can apply this to in your life. Once I get comfortable paying somebody to clean my house and probably going to get comfortable paying people to do a lot of other things for me too. How about you, Scott? What was your biggest takeaway?

Scott: Well, I think really high level. I think that this was a business podcast and a lot of ways, right? There was personal finance elements here, but really he was applying business concepts to how could he become an entrepreneur who could use that entrepreneurship to design a lifestyle he really loves and he got clearly loves his life and knows exactly where he wants to be spending his time and exactly the value of his time. And I think those were very powerful concepts. When I think about financial independence, I think a lot of our listeners are looking for an end point, hey, I am going to reach this number with this amount of passive income or this net worth relative to my spending, and then I am going to be complete on my journey to financial independence and then I will do something else. And what Pete did was no, he was just like, Hey, I’m going to accumulate runway as fast as I can this $40,000 in cash, and they don’t want to go take a shot. What I want to do, and I can do that and be comfortable with it and have high probability of success of building the life that I want much faster than a financial freedom trajectory because I know what my burn rate is. I know I’ve got cash to fund that and I know that within a year, or 400 days or however long he had, he was going to be able to generate enough revenue to offset that, and that comes down to basic mathematics, right? What is my daily burn rate? How much, what am I do I have? What is the value of my time? How do I generate income? How do I generate free cashflow, all that kind of stuff? He figured it out, and he’s not, and he’s been able to live exactly the life that he wants as a result of that.

Mindy: Yeah, he’s still working. He’s still, and he enjoys his, his job. He’s probably back up to his initial of income when he graduated from college. But he’s enjoying his life so much more. And basically, he took business practices and applied them to his personal finances. And that’s awesome. What I like about this podcast and talking to all these different people is that you know, what might seem second nature to one person is a brand-new concept to somebody else. And like you heard when I discovered that I could pay somebody to do stuff and I don’t have to do it all by myself, but you know, giving somebody the permission to do that is hugely helpful to somebody who might be stuck or you know, oh I’ve got to get to this number. Actually, I don’t have to get to this number. If I shift a little bit, look, now I can get to a different number. And I really enjoyed talking to Pete today because it was very eye-opening.

Scott: Hmm. And one concept that I’ve been struggling with for a really long time, and this is, you know, cause I, I, I do a similar exercise, right? I kind of know the value of my time and what I should hire out, what I shouldn’t, but I was really struggling with this concept of, okay, what’s a pretax? What’s a posttax? You know, how do I make that comparison? And so beautifully simple. It was so easy. He just answered that for me. Business expenses or pre and are associated with your pretax earnings, and personal expenses are especially with your aftertax earnings. Right? It’s so easy. I don’t know why that was so difficult. A concept for me to get, and that’s exactly what I needed for some of the things in my personal life that I’ve been debating. Do I do this? It’s going to be terrible. Do I hire it out? I Don’t know. Like yard is full of weeds, and it’s going to take me backbreaking hours of breakfast and work, and I have my answer after this episode.

Mindy: Pete Mockaitis changing the lives of Mindy and Scott.

Scott: That’s right. All right.

Mindy: Okay. Scott, should we get out of here?

Scott: Let’s get out of here

Mindy: From episode 77 of the BiggerPockets Money podcast. This is Scott Trench, and I am Andy Jensen, and we are encouraging you to go change your life too. Live your bliss. Follow your bliss. The end. Goodbye. Thank you for listening.

Scott: Bye, everybody.

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In This Episode We Cover:

  • Pete’s journey with money
  • Lessons he learned from his mother
  • How he applied the lessons he learned in his approach to early financial freedom
  • On growing up frugal
  • Why it took him three years to save a year’s worth of living expenses
  • His advice for people who would like to try the entrepreneurial route
  • The importance of being smart with your savings
  • On being real and quantitative
  • On tracking recurring and non-recurring expenses and breaking it down into dollars per day
  • His advice on building revenue and investing
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Fundamentally, someone is going to part with money in exchange for what you have.” (Tweet This!)
  • “Savings is key.” (Tweet This!)
  • “Time is money.” (Tweet This!)
  • “Your numbers are telling you something.” (Tweet This!)
  • “At the end of the day, you make your own money choices that really work for you.” (Tweet This!)

Connect with Pete

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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