BiggerPockets Money Podcast

BiggerPockets Money Podcast 85: From Financial Disaster to Financially Free with Jacob Wade from I Heart Budgets

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Jacob Wade knew nothing about money growing up. Any money he made at his mall jobs was instantly blown on mall food and silly teenage purchases.

His father passed away when he was four, leaving him an inheritance of $100,000 when he turned 18. Jacob quickly spent it on a truck, customized to the hilt. He soon had nothing to show for it, and at his lowest point, had to move in with his girlfriend’s mother because he had no money to pay rent.

Enter Dave Ramsey’s The Total Money Makeover. Jacob devoured this book and of course a lightbulb went off!

Jacob did what most new-to-FI people do, he cut out everything! He started tracking his spending and preaching to everyone who would listen. Finally fed up with his constant preaching, his wife said, “I don’t want to hear about this anymore. Go start a website!” And I Heart Budgets was born, where Jacob could preach to his heart’s content.

Jacob and his family are now on a year-long road trip around America, a mini-retirement to spend time with their young children before school starts, taking advantage of their financial position.

Later in the episode, Jacob drops a knowledge bomb on Mindy and Scott, sharing the existence of the “Spousal IRA,” a way for non-working spouses to contribute to an IRA.

Thinking you made such a big mess of your finances that you won’t ever recover? Jacob’s story shows that it’s never too late to start and that poor financial choices don’t have to define you.

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

Scott: Welcome to the Bigger Pockets Money podcast, show number 85, with Jacob Wade from iHeartBudgets.net.

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Speaker 2: 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 Bigger Pockets Money podcast.

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

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

Scott: I am doing fantastic. Virginia, my girlfriend, has started listening to the Money show and wanted to give you a compliment, Mindy, that she thinks that you’re fantastic.

Mindy: Oh, that’s very sweet. Thank you, Virginia. I think you’re fantastic, too.

Scott: She says that you’re way funnier than me.

Mindy: Oh, she’s right. I really like Virginia a lot.

Scott: All right, well we have a great episode today moving on from me making fun of myself, or you two making fun of me.

Mindy: Me. Me making fun of you.

Scott: Yeah. We have a great episode today with Jacob from iHeartBudgets. Just how budgeting allowed him to on an hourly wage begin building a pretty sizable net worth and now travel the country and live with the ultimate level of flexibility and freedom.

Mindy: Yeah, you know I send a little questionnaire to people who want to be on the show to get just a basic overview of their story, and in his answers, he said what’s remarkable about my story is that it’s not remarkable. I don’t have some super power. I don’t have anything wild and crazy that happened. I just did these common sense things, and throughout the whole episode today that’s what you hear. Jacob spending less than he earns, doing what it takes to bring in more income when his day job wasn’t cutting it. Budgeting and keeping track of his spending, and all the things that we just continually tell people to do. And, over again, if you do these things, you will succeed.

Scott: I will say that he made a big bet with a major portion of his net worth on his home, for example, and then he saw that bet all the way through. That put him in a position where he had to work three jobs and all that kind of stuff, but ultimately it paid off in a really handsome way where he was able to leverage that decision to help him get into the current situation of freedom that he's got today.

Mindy: Yeah, yeah. He made intentional choices that allows him to lead the life that he wants.
Jacob Wade from iHeartBudget, welcome to the Bigger Pockets Money podcast. I’m super excited to have you today because you are one of the first people I ever met at FinCon.

Jacob: Mindy, what was that? 10 years ago? 15 years ago? I feel like it’s been forever.

Mindy: Like 30. Yeah, it seems like I’ve known you forever, and I don’t know what it is. We get there at the same time. You’re always one of the first people I see at FinCon, except for the last six years when you haven’t been there.

Jacob: Well, yeah, besides that. It’s probably the hair. I have that hair thing going on. Mindy, it’s great to see you again. I am so excited to be chatting today. I’m so excited to be back after all these years, as well, so thanks for inviting me to the podcast.

Mindy: I want to hear your money story because I don’t know that I’ve ever actually heard your money story. So, tell me. Tell us.

Jacob: So, money’s a funny thing. I grew up not really knowing much about it. I learned how to earn it, getting a job and just went through my teens just getting money and blowing through it. We’ll go into detail about how much money I blew through in my teens because I had some inheritance that disappeared real quickly. Yeah, a lot. But, money didn’t become a focus for me until I got engaged. I was 21, I think. Got engaged to my now wife of over 10 years, but got engaged and realized very quickly in eight months I had to figure out this budget thing because I had no idea where any of my money was going. So, I decided to track it. First time ever.
I’m like okay, where am I spending my money. I used to work at the mall. After my first month of tracking, I realized I spent $600 a month on mall food by myself somehow.
Mindy: Well, it is expensive but wow. Yeah, you should be making healthier choices.

Jacob: Yeah, so besides my cholesterol and everything else, I realized the money was disappearing, getting blown up, and I’m sure many people have this story if they’re into money. Somebody dropped a Dave Ramsey book in my lap. I read it cover to cover. I listened to the audio and realized I had no idea what I was doing and I need a plan, I needed a budget. I needed to figure it out. So, fast forward, got married and I was living on $14.00 an hour, and my wife was able to finish out her last year of college at home. We just lived crazy, crazy frugal cheap and saved money at the same time. Then, everybody started asking us, “How do you do that? I know you don’t make any money.” Then, I started helping people at work, and then I started helping family and friends, and then I started making budgets for everybody.
Then, eventually my wife said, “I literally do not want to hear about this ever again. Please just go write a website so you can go talk at the whole internet and not at me anymore about money.” That was it.

Mindy: I love your wife.

Jacob: So, that’s what started iHeartBudgets.net. 2012 is when we kicked it off, and we just had a kid and I wanted to continue writing and learning and growing in that area, so I’ve been doing that ever since.

Scott: Let’s go back to the inheritance event because it seems like that might have been an influential … It seems like a totally different dynamic with money that you had maybe in your teens than you did during this time period when you were heavily budgeting.

Jacob: Very much so. Yeah, so my dad passed when I was four and there was just some unfortunate stuff around that, and we had an inheritance coming. Just before I turned 18, I also broke my neck. I got in a car wreck. The car flipped six times, and every single time that car landed, it hit me on the head and it actually crushed my spine. The fact that I can move my neck is insane. The fact that I can walk is a miracle, but as part of that there was a settlement. Settlement combined with some inheritance, I had $100,000 in my bank account the day I turned 18, which is not a good idea to give to any 18 year old that has zero money training and no clue what that actually means.
Week by week over the next two years, I unloaded $100,000 and I have pretty much nothing to show for it, which was right before I got engaged and then realized my money’s all gone, and I blew through it this quickly. I have no idea what to do. Yeah, that money did not last. It was slippery. It just disappeared.

Scott: Well, what was it spent on? Was a portion of that medical related?

Jacob: It was not medical related. Luckily, all that was covered with all the other insurance stuff. Let's see. So, mall food, obviously. That was top priority. I ended up getting a truck. That was about nine grand, and then I put $4500 into this stereo that included a PlayStation and Xbox. I had Underglow. I had subwoofers. I had black lights in the cab because that's what you do when you're 18. Then, I actually bought my mom a car. So, here's the one thing I did do. I paid for half my college. I could've paid for all of it but I'm like no, normal people get students loans so I'm going to take half of these loans out so I can "build my credit" and then paid the other half off.
Then, about $35,000, literally have no idea. I’ve done an accounting for all of this, and about $35,000 of it, I have zero clue where any of that money went. Pretty sad, yeah.

Scott: So, once you had blown through that, maybe graduated college, when did you feel like, “Hey, I got to get serious about this?”, and how did your lifestyle change?

Jacob: I think the wake up moment was when I had to move out of my apartment and back in my girlfriend’s mom because I had no money. Then, at the same time, we had just gotten engaged. Her mom was generous enough to say, “Hey, live here and save money for the wedding and save money for your future.” That was just trigger of I don’t know to. I don’t know what to do. So, it was at that time … It was all at the same month that I got the Dave Ramsey book, too. So, it was just all three of those things together, moving home, needing to save, getting engaged and then reading the Dave Ramsey book.

Scott: Okay, so let’s dive into that month. Before that month, where were you living? What was your job? What was your situation like from a lifestyle perspective?

Jacob: I lived in an apartment with some buddies that were not super great influences and I worked at radio shack, which was awesome, and I was selling people batteries and cellphones. But, I blew every penny I made. I mean, I made $11.00 an hour. Averaged out, there was commission if I sold a Tracfone to somebody, I basically made that and spent it all on rent and spent it all on food and partying and clothes and whatever. Then, it was gone. So, as soon as I moved back, it was I need to save hundreds and hundreds a month to pay for a wedding, and a honeymoon and everything else.
So, that’s when the budget started. That’s when the OMG moment, I can’t believe mall food doesn’t actually taste that good, I should stop spending on it moment happened, and then I just started tucking it away into a savings account. And then, the Dave Ramsey thing. I just listened to his book, and it was just all common sense stuff that I probably could have articulated but he’s very motivational and it was in a way that just struck a cord, and I was off to the races. I didn’t want to spend anymore money.

Scott: What year was that?

Jacob: That was 2007.

Scott: Okay, so in 2007 you go through this moment. You read Dave Ramsey’s book. Does that lead to a budget and accounting of your spend? Is that one of your first steps there that forced this?

Jacob: That’s exactly it. It was funny enough, my girlfriend at the time, now wife … or, fiance, I guess … had just finished an accounting class and just gave me a budget template. I was just using Excel, popped on there and started typing all the numbers and then I would just go through my credit card … I only had a single credit card at the time … I would just go through the statement and say okay, let me look at everything here and let me categorize each of those things and let me just pop them into a spreadsheet. What does that actually look like? And, that’s when it was wow, that’s why money disappears because I have no discretion.
So, that was the first time. It was just a crude accounting spreadsheet. It’s funny because I can go back to 2008, 2009 and look at some of those spreadsheets and see where those dollars were going. Even though it was crude, it wasn’t sophisticated in any way, it worked. It was a mirror. It’s a financial mirror. You hold it up and say oh, that’s what I actually look like on paper and it’s sobering.

Mindy: You know, that’s a really good point. It doesn’t have to be perfect. It doesn’t have to be this elaborate thing. It doesn’t have to be super formal. It just has to be something that you can look at and understand.

Jacob: Yes.

Mindy: I am not a computer person, despite working at Bigger Pockets, which I think is maybe not so much classified as an internet startup anymore. Everything’s on computers, and I don’t want to do it on computers. I want to do it on a piece of paper. I literally have a spiral notebook that I get for $.10 at the back-to-school sales and I have lines on it. It just says here’s the date, here’s how much I spent, here’s where I spent it and a rough accounting of what it is, how much I’ve spent for the month. Actually, okay, so that’s how we used to do it. I’m going to say that’s how I do it now even though I use the Waffles on Wednesday … My husband used the Waffles on Wednesday instructions to do a Google questionnaire that goes into a spread sheet and that’s how he keeps track of it now.
But, when we started, for years we did it just on a notebook paper. All you need to do is write it down somewhere, in some way that makes sense to you. I don’t have 27 years of spreadsheets, though, like you do and like so many people do, but just tracking it is so important.

Jacob: That’s the key, and I think what happens is people think they have stuff figured out in their head, but your head doesn’t work like a spreadsheet and your brain lies to you all the time, and you spend on emotion and you always give yourself a buffer and an excuse and this and that. I mean, paper is unforgiving and it tells the truth no matter what. You write that down. You’re going to hold that up and that’s your truth. I always tell people I don’t care what you tell me is important to you. I don’t care what you tell me your financial situation is. Your wallet doesn’t lie, so let’s see actually what’s important to you by where your money’s going and the only way to see that is to write it down. Or, what I tell people to do is just go to your credit card statements and print them all out and then just categorize each line and just make a little total and it’s like okay, that’s actually what’s important to me.
If I say something else is important, let’s adjust from there. Let’s take the priorities and let’s take my goals, and then lets cut all the other crap out. But, the only way to see it is to write it down, and I like the paper and pen. I tell people to start there period and then put it on to digital format.

Mindy: Yeah. You know what? I kept it right where I walked in. You park your car in the same place at home every day, and you walk in the same door every day. I had it right there. I couldn’t not see it. I would have to willfully ignore it, and when you want to fix it, you get all excited. What did your first month look like? You read the Dave Ramsey book, you wrote out all your stuff. You analyzed it, and then what did you do? You were excited to fix it, right?

Jacob: It became like a game to me. It was a goal. It was like okay, from $600 maybe if I cut that down to $200 a month and yeah, that Japanese food is awesome, but it’s really not that good so let me adjust here. Then, maybe you blow it or something comes up, but it doesn’t matter because you’ve got a game plan and all of a sudden you’re in the game. You’re not just sitting there armchair quarterbacking your life. You actually get in the game and you do something about it, and you get motivated to continue to do something about it. It’s like this upwards spiral effect of just making better decisions. So, for me, yeah, it was exciting because what I find, because I’ve done a lot of financial coaching with people, too, is it’s mostly their life is just financial chaos because they’ve never written it down.
Once you put it on paper, there’s this thing that clicks that oh, there’s a clear path here. It’s not all unknown. It’s not all throw my hands up in the air and blame somebody else. It’s I can do this now and then I can take this next step here, and then I can go here. Once you write it down, all of a sudden you have a place to go. You have the roadmap, so it is very motivating.

Mindy: Okay, so I’m assuming you cut out the mall food once you figured out that $600 for not so tasty cholesterol laden-

Jacob: I cut most of it out, yeah. I think we probably cut that down to under $100 a month at that point. I packed some lunches. I figured out peanut butter and jelly and went from there.

Mindy: What are some other things you cut out, or significantly reduced or changed to help figure out, and did you say you had any actual debt at this time?

Jacob: Just the student loan debt. I didn't start tackling that yet. Everything was I need to pay for this wedding and honeymoon, so I'm saving toward that goal first. Even though I knew the Dave Ramsey "Get out of debt", I'm like I'm already on this path to our honeymoon so let me just do that. But, I-

Mindy: I’m going to jump in here and say you didn’t have to go on a honeymoon.

Jacob: Right. What I’m saying is my mindset was … I hadn’t completely changed my mindset yet, so it was still oh, I’m on this path so I’m going to at least saving toward that. But, I think that I already had a work cellphone plan, and I lived at home. There wasn’t a ton of other expenses. Food was just really killing me, and I think what I did was I became more mindful about going out to parties or what that looked like, and I just got more conscious of just driving around for no reason like, “Oh, I’ll meet you there. I’ll meet you here.” I got more coordinated with that. It wasn’t this huge conscious “Okay, I’m going to become the biggest pain in the butt friend, and make sure that everybody only drives to me and we never party” or whatever. But, it was just my day-to-day decisions started to flow from this place of okay, is there a frugal way to do this? Is there a better way to do this?
We could keep it simple, but it's not necessarily this huge … I would say if I was later in my life and I had a kid and a mortgage and a house and stuff, there would have been probably a lot of other stuff to cut. For me, it was just being more intentional with my dollars, so it was just a mindset change.

Mindy: That’s something I hear over and over again, too, is being intentional with your dollars because when you’re not paying attention, they just slip through your fingers. Oh, it’s only $1.00, it’s only $3.00, it’s only $10.00, and then those add up. If it was only $1.00 a month, it wouldn’t be a big deal but it’s $1.00 a day, or $1.00 three times a day or whatever.

Jacob: Death by a thousand needles is what I call it. It’s just those little breaks and all of a sudden hey, there goes a thousand bucks a month.

Scott: So, you start tracking your spending and you have all of these changes that you make. How do you perform against your plan over the next six, 12, whatever the timeline is between then and your honeymoon?

Jacob: That’s a great question. The first three months you just absolutely fall on your face. You fail, and you need to expect that. Having done this myself, and what happens is when you have life changes, you got to reassess your plan and rebuild your stuff and then you’re still going to fail. But, if you’ve never done it before, the first three months are just awful. You feel like you can’t kick the field goal. You’re never going to get it in, but that’s okay because what you’re doing is you’re actually doing something about it. You’re being intentional. I spent less on mall food because that was really easy because it’s really hard to spend as much as I did. It took a lot of effort. No idea how I did that.
But, there were places where I blew my regular grocery budget, or I drove more than I anticipated, or I didn’t estimate the numbers correctly because I had no gauge for any of this stuff. So, I always tell people you give it three months to even feel kind of settled, and then even then, you just got to know that life happens and you just roll with the punches. I would say the first three months were rough. I would say I got in a super saving’s mode, started selling more cell phones at radio shack. Got motivated to actually make a little bit more money, too. Got a little more aggressive on the sales side. So, the next three months after that, it was pretty good.
We got married eight months after that whole thing. So, that was December, January and then in August we got married, and I was able to put away … It wasn’t a lot. Maybe five grand or whatever, but it was enough to hit the goals that I had in front of me, when before it literally would have been I woke up in August, “Oh, I still have zero dollars in the savings account.” But, I did something. It didn’t feel good. The first three months just doesn’t feel good. Getting on the plan and budget doesn’t feel good because you’re setting these goal posts and you’re failing, and when you don’t have goals, you never have to fail so that’s why people just float through and never want to pay attention to it because they don’t want to realize, “Oh, I’m doing something wrong.”
But, if there’s never a goalpost there, you’re never going to fail but if you don’t fail, you’re never going to learn, right? So, you have to be willing to slog through those first three months and then it just turns into clockwork after that and it’s awesome.

Scott: After the honeymoon and wedding, what did you do with your money after that? I assumed you continued to budget and try to increase this spread between income and expenses. What was your philosophy? Did you ever have a moment where you changed your thought around “Hey, I’m not going to save for an expense. I’m going to save to invest or build assets”?

Jacob: Yeah, it took a while because we were college broke. I was making $14.00 an hour. My wife was still finishing her last year of college, and we moved out to where she was for college, so we just got buy. But, we cash flowed her last semester of college, for example. A couple grand. Since we were so broke, we got some grants and stuff, but we were able to cash flow that and then we were able to put away $300 to $500 a month because we wanted to make sure we had money to move back home because we knew we were moving back home. But, yeah, we were making very little and still saving money.
What happened was we actually got a side job doing some babysitting. I actually did some telecommuting an hour or two hours a week from my old job. It was almost side hustling in a way. When I look back, I guess I could call it that because we were like okay, we can only get so far with this little income and I want to make sure I’m investing in my 401k, for example, up to the match. Let me just put a little away here. I need to see some growth because otherwise you’re not super motivated if there’s not a little bit of growth going on. Then, we were like okay, well what else can we do? Well, there’s this family that needs babysitting, so my wife did some babysitting. And, oh, well my job is allowing me to do a little remote research for their products. Cool.
Then, we would just stack all that into a savings account for our move back, and then moved back, got a better job. She got a job, and then it was we want to get a house. So, actually, this might dovetail into real estate a little more. It was 2009 when we moved back to Washington state, and you know what the market was there, and we said okay, we're both employed. We don't make great money but we can save her whole paycheck and some of mine and we can live very frugally, and we can try and take advantage of this opportunity. The market's crashed, so what should we do here? So, we started saving.

Scott: When you say very little, I assume it was hourly wages in Washington state that you were living off, right?

Jacob: Yeah, so when I came back, I went from $14.00 an hour when I was in Oregon. I moved up to $17.00 an hour back in Washington state, so it was a decent raise, but the cost of rent almost went up equivalent to what I got in my raise, but she was able to go get a job making $14.00 an hour as well and we could put all of that away. So, we lived on my $17.00, I think it’s 29k’ish gross for the year after taxes, but we put every paycheck of hers away.

Scott: Okay, people are going to say impossible, right? Impossible. Can’t be done. Not in Washington, not in the Pacific northwest.

Jacob: Oh, man.

Scott: Can you walk us through what was your lifestyle like? What was your budget like when you made that transition that you were able to do that?

Jacob: Yeah. So, this is 2009. We lived in Redmond, Washington, one of the most expensive places there is because I was contracted into Microsoft … One of the worst contracts ever because I was making $17.00 an hour, but we lived in an apartment for $850 a month. It was a two bedroom. We would spend about $300 a month on food. Extremely intentional meal planning, cooking from scratch. We weren’t full organic at that point, but we were just keeping it simple, did what worked. We got a puppy, so we had a dog, too.

Scott: Any kids?

Jacob: No kids at that point, no. One of our goals was to get the house before we had kids. We just had this plan in our head, so no kids and it was just us. We would do a date night once a week, but date nights were okay, what’s on Groupon? Let’s go grab half off appetizers, do the Happy Hour thing, bring the Groupon in and we’ll spend $30.00 out the door. We’ll still get our apps and a couple of drinks and be happy, enjoy it, get back and Netflix or whatever. It was simple but it worked. I don’t know, I look back and I don’t feel like I was missing out on anything. We had this huge goal in front of us of getting a house, and we were so excited for that, and that goal meant more than blowing money on really anything else.
Our friends respected that, which was nice. I know a lot of times that won't happen, and "Oh, why can't you come out every day for lunch" and this and that. But, I don't know, you get into a good routine of okay, we always packed our lunch, we commuted together. I'd drop her off at work and go to mine, and then come back and get her or I'd ride the bus. We kept it so simple, but we didn't feel like we missed out on any life at that point. If we just relaxed and did what maybe our default would be, we would have basically probably spent her whole paycheck on just eating out more, or driving two different cars, or getting a better car, this or that.
Oh, and if you don’t mind me making this point, I think the cars is one of the biggest things that allowed us to get our house. I drove a ’94 Honda Civic. She drove a ’94 Honda Accord. Both of them had 250,000 miles on them, small oil leak and a little rattle in the tailpipe but got us to work and back. We paid cash for them, less than two grand a piece, and they were insured for pennies. It was so inexpensive, and knowing that today the average person spends $900 a month on their car, which includes the car payment, the higher insurance because you have to have the premium insurance when somebody else holds the note, the fuel and the maintenance. You add all that together, it’s $900 a month on average per person.

Mindy: I did not know that number.

Jacob: Go the Bureau of Labor Statistics website. You will love the data there, but it blew my mind when I added all the pieces together and it hurt my soul a little bit. If you have a goal, own your car. That’s all I have to say. If you have a financial goal or you want to invest, you want anything to grow, you need to own your car.

Scott: I'll say if you have a goal, you want to own your five plus years old economy car, right? When you buy a new car, even that's without the insurance and all that kind of stuff, even if you buy a new car cash, at least in Denver, the emissions and the registration with the state cost exponentially more the first couple years of a car's life than in the out years. At least, in my experience, too. All of these things are exponential weighed towards the cost of the new car. That's just a huge anchor in your journey to financial freedom and building your [crosstalk 00:28:16].

Jacob: It is mind blowing how much money disappears on cars, and they're all soft costs, depreciation and a bunch of other stuff. People lighten the load saying how much can I afford per month, and they're asking the wrong question. It's how much can I afford to lose because it is insane the amount of money lost. If you go to my website, I've probably written 10 articles on all the different angles of ways car rob you of wealth. I tell people that car payments are keeping the middle class-middle class forever because they are marketed at you, and they steal your dollars, and you feel good about it because you're in a shiny car. But, it's awful.
First five years of a brand new car's life, you're going to lose I think about 60% of the car's value. 60%. That's a real figure, and nobody knows that because it's a silent killer. It's depreciation. You don't feel it until you go to sell, but you're probably not going to sell. You're just going to trade it in and get the newer model, and then it's just this … If you think about investing and compounding interest, just turn that in reverse and stick 100,000 pound anchor on it and watch it fall because that's what car payments do.

Scott: If I could buy any car right now, I would buy the exact one I drive, which is a 2014 Toyota Corolla. The problem is I bought it new in 2014, so I paid the price of that depreciation rather than the next guy when I could easily buy any of hundreds or thousands of these 2014, 2013 models that are right on the market already 60% depreciated.

Jacob: It’s true, and it’s just the facts and figures of life. Luckily, you got one of the best models ever. I always tell people Honda and Toyota, they’re going to hold their value and they’re going to last longer. So, you can hang on to that thing 15 years, and at least feel a little better about it but you have to hang on to it for 15 years, sir.

Mindy: Oh, you can hang on to it a lot longer than that, Scott.

Scott: Yeah, my first car was a 1994 Toyota Corolla. I briefly drove a Ford Explorer for about eight months in 2000 whatever, but it’s back to Toyota Corollas. It might be a lifetime of Corollas for me.

Mindy: It is the lifetime of Hondas and Toyotas for us, too.

Jacob: We’re doing something different, but if I had a regular commuting car, for me it would be probably just a 10 year old Prius because I’ve seen ones that roll over 300,000 miles. If I could pick up one with 150,000 miles for four grand, 50 miles to the gallon commuting. Done.

Mindy: What are you doing different there, Jacob?

Jacob: What am I doing different? So, as you notice I’m in a house right now. It’s not my house.

Mindy: I know. I noticed you were in a house. I was very surprised to see you in a house.

Jacob: My actual house is parked in the driveway of this house. We are traveling the country, living in a travel trailer so that’s why I don’t have a Honda or a Toyota. I have a big huge Ford diesel truck that tows my house around the country.

Mindy: I will say that the diesel truck, no matter what make or model, is the truck of choice. The fuel of choice for RV’ers. My parents live in an RV, and my dad, when they went and bought their RV … Oh, did you buy your RV new?

Jacob: We bought our RV used, and we bought the truck used and we own them both.

Mindy: Okay. My parents, because they were going to live there … They’ve been in this trailer for 12 years. 13 years.

Jacob: Wow.

Mindy: 12 years. I don’t know, a long time. They went and bought their truck new and they bought their RV new, and they’re going to drive it into the ground, both of them, but still. You can get a one-year-old used RV, the same depreciation on vehicles also applies to RV’s even more so.

Jacob: Yes, because RV’s are recreational vehicles and they’re not built as quality or reliable as a regular vehicle even, so they go down real quickly. So, we were able to get a 2011 model last year, and we picked it up I think for 15 grand, and new out the door, it was like 45 or 50. So, you’re just what? Six, seven years in and there’s that 60% or more. It’s just dropped like a tank. Same with our truck. We got a classic truck. It’s a 2000 Ford F250, but it has a very popular rare combo model of six speed, and it’s a 7.3 Power Stroke diesel. I know that doesn’t matter to most people but if anybody knows what that motor is, they know what that motor is. So, we picked that up for $14k, but it’s one of those cars that it’s actually appreciating, which is funny.

Mindy: Wait. You’re all in on your housing and driving costs for $30,000?

Jacob: Yeah.

Mindy: Scott, what’d you pay for your Honda Accord brand new?

Scott: My Corolla? Yeah, $17,000, $18,000.

Mindy: Oh, okay. I thought it was more expensive. I haven’t bought a new car in a long time, but the two cars that I drive right now were both purchased new. The only two cars I’ve ever bought new. So, in the famous four we asked what’s your biggest money mistake? I would say that 40% of answers is I bought a new car.

Scott: Yeah, a good chunk of answers seem to be that.

Jacob: It’s true. I’ve never bought a new car. I’m obviously very passionate about not buying new vehicles, and obviously my biggest money mistake was blowing through a hundred thousand dollars, and then looking back at the opportunity costs every couple years, I’ll do a little calculator on investments and it makes my soul hurt, but yeah, the car thing, it makes sense. It follows the data because again if you look at the Bureau of Labor Statistics and how many people have car loans and how many people are upside down on those car loans and everything else, that totally makes sense.

Mindy: Okay, well we just spoiled the fact that you sold your house.

Jacob: I did.

Mindy: Let’s talk about buying your house. You bought it at the bottom of the market.

Jacob: It was the bottom-ish, yeah. We bought in 2010. We saved, and we wanted to get in real quick, so we just did the FHA. We saved the bare minimum, three and a half percent. I love that this is Bigger Pockets and I won't get berated for that. If this was Dave Ramsey's podcast, fist shaking and all that stuff. What happened? We just saved the bare minimum. I think it was fifteen grand or something. Real cheap. And, since we're in the Seattle market, we got a three bedroom, two bathroom house but it was still $329,000 because Seattle area. But, that was inexpensive because it had just dropped, so we got that one. For us, it was a turnkey house, meaning it wasn't a fixer upper. It actually wasn't a big investment thing for us. It was just we really want to get into this house, and we just feel like the market's at a good place for us to do that and I just started looking at the cycles, and I'm like okay, if we can get in, let's make this work.
Now, this is with me, I think at that point I was only making $20.00 an hour. Michelle was still at $14.00 or $15.00, so it required our combined income. I didn’t make enough standalone to get that house, but we just felt very passionately about getting in, and so we picked that up.

Scott: How big a down payment were you able to make because of your savings?

Jacob: Yeah, so we only saved for a year, so we had 15k put away, and we just put that in.

Scott: In that year when you were saving up with all this, were you always taking the match in your 401k and otherwise investing, or was that the total of all of your savings?

Jacob: I never pass up free money. I always tell people more than anything else, don’t ever miss that free money match. We did the match. I think it was 50% match on 6% of your income or something like that. So, we were both taking that, and then once she ended up leaving that job, we rolled them over and all that stuff, but yes, we were still doing the match and then we saved I guess it was about $1500 a month after taxes and everything else on hers. I think it was only 10 months. I mean, we went quick. I think it was even less than a year.

Scott: That’s great.

Jacob: But, we saved $1500 a month for 10 months, had 15k, and then we had our offer real quick after that.

Scott: So, what’s next? After you bought the house, what was your payment and then how was your ability to save influenced after that purchase?

Jacob: Yeah, so we made ourselves house poor. It was a conscious choice. Our payment was $2200 a month, PITI, all of it in, but since it was FHA, less than 20% down, we had more insurance which killed me, but I’m like we got to get in. It was a 3.25% rate. It was really good back then. So, we got in and then our savings was very slow at that point. We were maybe popping away $500 a month after our 401k investments. It was not much at all. Maybe less than that. We knew what we were getting into. I think the big killer happened when one of our huge plans is always we get the house, and then if we get pregnant, we knew we wanted her at home and we were really excited about that, but I thought I would have a little more time to build my career up, and we didn’t.
So, got pregnant and she was at home and I was still at $20.00 an hour. We were in a tough spot. I had to dial up some income really quick, hence starting a website. Then, I also became a tax professional on the side, so I had three jobs at one point to make it work.

Scott: Let’s walk through the tax professional one first. How did you go about setting that as a side hustle for yourself?

Jacob: Totally, yeah. It was not on my radar at all. We were just in a small group at church, and the guy owned a CPA firm, and all three of his daughters were CPA's which was amazing, and then another guy in the group, so it seemed like everybody worked for him, and he was like, "Hey, if you go get your enrolled agent's license, you don't have to go through the whole CPA thing. The enrolled agent thing is still recognized by the IRS as a full on tax professional licensed to practice in all 50 states. You go get that, you can come work for me." So, it took me a year, but I studied and pass the huge three government exams and I became what's called an enrolled agent, a little known tax professional but on the exact same level as a CPA or a tax attorney.

Scott: Is this a lucrative option? Is this full-time year round? Was it seasonal?

Jacob: It was seasonal only, and I would just get a percentage of the clients that I picked up, and he said, “Here you go. Here’s 30 or 40 clients. Go for it.” I just dove in. To be honest, I was way in over my head, but the thing that was crazy is I did that, I was running the website on the side, so I had 40 hours a week at my regular job, running the website and then I was putting in sometimes in tax season, from February to April, I was putting in another 20 to 30 hours in taxes, so I was doing about 80 hour weeks, which was a little much.
Scott: So, between these things, were you able to stay afloat, or were you able to actually begin saving again in an aggressive way?

Jacob: Mostly barely stay afloat until I got a few promotions at work, but it was just do or die time. It was like okay, we knew what we got into. Our house was already starting to appreciate very quickly because the market was recovering, ’12, ’13, ’14, and we were like okay, we know that long term this is the right decision, but I’ve got to just grind through this thing. So, then I was able to get a promotion at work getting up to about 60k, and then I made a couple more moves and just started to jump that up every year. I would apply for a different job and move around. I ended up getting I think six promotions and two raises in over eight years, something like that. Or, six years. I was just super, super aggressive because I knew what I needed to do and I really wanted to not have to work 80 hours a week.
Yeah, it was a long hard road, but then we came out on the other side looking at it like okay … We refi’ed in there, and our payment was down to about $1800 a month, so we had a little breathing room there. And then, once I started making more than we needed, and then all of a sudden our house had appreciated over $100k at that point. But, it was three years of just grind.

Mindy: Okay, so a couple of things. First of all, I want to note that in a lot of these stories that we hear, the most successful people are the ones who do whatever it takes to get their bills paid. They take the second job. They take the third job. They take the unglamorous job. Patrice Washington's husband worked at Taco Bell. They went from owning their own real estate company … Do you remember that, Scott? Real estate company where they were selling millions of dollars a year, and when you sell millions of dollars a year as a real estate agent, you're making a lot of money, like three to five percent depending on … Meh, let's call it three percent, but still three percent of a million dollars? I'll take that.
Then, when the market crashed, he went and took a job as a Taco Bell manager. I’m not knocking Taco Bell managers, but they make slightly less than the real estate agent who’s selling millions of dollars in real estate every year. Instead of just saying, “Oh, that’s beneath me”, all the people that are successful don’t have that attitude. They’re like I’m going to do whatever it takes. If I have to do this, I’m going to do this. You went and got a CPA job, or I’m sorry, registered agent?

Jacob: Yeah, it’s called an enrolled agent.

Mindy: Do you have a CPA background or a finance background?

Jacob: Nothing. Zero, zip. I just like talking about money and eventually I did a little research online about taxes, and then I just went and studied. I got the huge book and I just read through the tax book and I’m like all right, let’s do this. Zero experience, zero knowledge. No background whatsoever, but I was passionate about it. It was another way I could help people with money, because I like doing that, and I needed a job so I just did it.

Mindy: Yeah, that’s awesome. Now, you said your house appreciated and you refi’ed once. Did you pull money out of that?

Jacob: No, we didn’t pull any money out, but we did extend the terms. I think we were three years in at that point. We didn’t refi as a 27 year. We went back to a 30. I just needed a little breathing room. It was just at that crunch time where I think at that point number two was on the way, number two kiddo, and it was just like I need to breathe a little bit. We were at $2250 a month for the mortgage and it went down to about $1798 a month, so I was like okay, I can breathe just a little bit. Even though I know I extended this loan, I had always planned on paying it off early or what eventually happened, selling. So, we refi’ed and we got our rate to I want to call it four percent, but we not only lowered our payment but we got rid of that mortgage insurance because it had appreciated.
So, I hated paying mortgage insurance because I knew it was going absolutely nowhere. It was still write off-able, but because I was a tax pro, there was a rumor that the mortgage insurance write off was going away, so I freaked out. I just wanted forward progress only so I got rid of that.

Scott: You said this was a three year slog basically, and you came out the other side and back into a position to be on the significantly positive cashflow, I imagine. What are some of the next steps there? When did you begin building up an asset base with investments and those types of things? Was that the next part of the journey here?

Jacob: Yeah, so through the entire thing, I did not stop investing in my 401k. I was never, ever going to pass up that free cash, so even if we couldn’t breathe that month, I’m still putting my six percent away. I don’t care, I need that, so long term, especially as the market was recovering, that money grew pretty quickly which was nice, and six percent of what I was making wasn’t a ton, but it was just something, so I never stopped doing that. I would say yeah, I think I did a total of three years of taxes, and then I got a promotion to where I could more than cover our bills. I think I still stayed on for one more years, but I only did a couple of clients so I offloaded at that point.
But, it was pretty quickly after that. It was a couple of things. I started making more money than we needed and we had positive cashflow, so the first thing we did was actually start to remodel some stuff because it was a 1989 home and it looked like a 1989 home. They had never done anything with it, so the first thing we did is remodel the whole kitchen ourselves. This is a big deal for me is DIY. Not only don’t buy new cars, but then learn some skills. Being able to do stuff yourself, whether it’s home improvements or car maintenance or whatever, just being able to do something and not pay a professional labor can make you more confident in owning something like properties or a car, but it can also save you a ridiculous amount of money. I mean thousands a year, thousands and thousands a year.
So, we remodeled our kitchen for $5000. Granite countertops, brand new stainless fridge that we picked up for $14.00 and I just replaced a … No, picked up for free and I replaced a $14.00 part and fixed it. It was a $2000 fridge. We had cabinets that were left over in our garage that we just measured out and were able to rehang. My wife's brother came and he made this beautiful kitchen also. This is his house, but he helped us hang our cabinets because he was a cabinet guy. Amazon for all the appliances and parts and things. We got a free stainless microwave. I mean, we just scraped it together and it turned out really, really, really nice and our real estate agent said it looked like a $25k upgrade and we did it for $5000 just because we didn't want to just improve it to improve it. We wanted equity. We wanted sweat equity out of the thing.

Mindy: Okay, this is my area of expertise here is the DIY remodel. You got all of these free appliances and you lived in Redmond, Washington, which is a very nice neighborhood. Microsoft is there. Isn’t Kirkland there? Costco there. There’s a bunch of stuff there.

Jacob: I realize I wasn’t clear. We bought just north of Kirkland in Bothell, Washington but still, same thing. It’s right at the top of the 405, which is where all the Microsoft people hang out, so yes. Very, very nice area.

Mindy: So, did you plan this rehab in advance to get the refrigerator and get the microwave and all of this, or did it just come together when it came together?

Jacob: I think it was one of those things, and it’s just how all our DIY stuff goes. Something broke, and my wife’s like, “Well, let’s just get a new fridge.” Maybe the fridge water thing didn’t work. Something small where I could just fix the part. She’s like, “Well, let’s just get a different fridge.” So, then we found this really cheap fridge and we’re like, “Well, if we go pick up this thing for free …” and, my wife’s like, “Well, we might as well just get new counters while we’re at it”. Then, all of a sudden it just snowballed, and we’re remodeling the whole kitchen. So, no, it was piece by piece, and we just Craig’s List. I don’t know if anybody’s heard of the Buy Nothing groups on Facebook, but they are pure magic. If you look up Buy Nothing and then just your city area, there are people literally just giving away stuff all the time, like I just need to get rid of this.
We’ve clothed our kids. We’ve gotten almost all of our furniture. We’ve gotten appliances, we’ve gotten all their toys. Tens of thousands of dollars of free stuff on there just because people don’t need it anymore. Then, we’ve gotten rid of most of our stuff, too, through it. We used Facebook groups for that. But, no, it was not a preplanned thing until the fridge and then we were like, “Well, we have these old cabinets.” We got a tape measure out and we’re like, “Well maybe if we stain that.” It just started to come together.

Mindy: Yeah, we planned ours out, but also when we bought our house, it had a dishwasher and that was it. There was no refrigerator, no stove, no microwave. All that stuff worked, and it was a foreclosure, so when something works, they take it with them allegedly. I guess that's a broad comment, but when you buy a foreclosure, you don't really expect to find a lot of appliances in there. The only thing that was left was this crappy old dishwasher that didn't really work. It sounded like it was powered by a jet engine, so that was really nice.
Okay, so you did your DIY. How did you learn how to do stuff in your kitchen? You didn’t come from a rehabbing background.

Jacob: No, same thing with working on cars or anything else. Just go to YouTube.com. You search what you need, and then you just copy what they do on video. Absolutely everything in my entire life DIY, I did that. Now, I will say my wife’s brother hung cabinets on the side, so he showed me that part, but everything else, installing dishwashers, all the maintenance I’ve ever done on my house for the eight years we owned it was all YouTube.com. There is an unlimited wealth of knowledge online. Obviously, Bigger Pockets is one of those places, but you can do anything. Just use a little discretion. If it’s Cletus with his Bud Light, and he’s rewiring the house, maybe not watch that video, but if you got somebody whose like, “Here’s the step-by-step …” And, usually, it’s one of those first hits up there.
Just Google it. Just hop on YouTube and go take care of business. You do not need to spend $300 an hour on somebody to fix … I fixed my air conditioner. I replaced my water heater. I swapped toilets out. We did the flooring and the doors and everything else. We did the whole kitchen. We hung cabinets and I repaired the dishwasher. I mean, everything from YouTube.com. Not a craftsman by trade or any of that stuff.

Mindy: Yep, I learned everything from YouTube or before YouTube, I learned from books. You just go to the library and there’s a ton of books. Yeah, that’s a really great tip because YouTube, just even little things like how to paint your wall, you watch a couple of different videos and you’re like, “Oh, that makes so much sense.” Or, “Oh, that looks dumb. I’m not going to do that.” But, just watch a few videos and you will see some amazing tips. You don’t have to reinvent the wheel. Don’t figure it out. Just watch a video. We actually have a stackable washer and dryer, and they’re really, really nice. They’re LG, and they’re the red ones. I’m not paying $2000 and $3000 for a washer and dryer. That’s ridiculous. I already have one that works, but it’s a long story anyways. I had to get new ones.
We asked them, “Does it work?” “Oh yeah, the last time we used it, it worked.” That is code for no, it doesn’t work. Just FYI. If anybody ever asks somebody, “Oh, the last time we used it, it worked fine.” That means no, one of them is broken. In our case, it was the dryer. My husband is a DIY guy. He’s like, “I’m going to figure this out myself.” He called somebody, and they’re like, “Oh, it sounds like it’s the thermistor. I can come out there and check it out for you for $200.” I love my husband, but he does not want to spend $200 on anything, so he is certainly not going to spend it on some guy to come out and replace the thermistor when he can just rip the whole thing apart. So, he looked on YouTube, the exact make and model number. Watched the videos on how to take it apart … there’s a thousand screws in a dryer, just FYI. Put them all on a piece of tape so you don’t lose them.
But, he’s like, “Oh, now I know how to take apart a dryer.” So, it’s fun to figure out all these different things.

Jacob: Here's the thing about DIY. You're doing multiple things. It's not just saving labor from a professional coming out. It's making you a more competent owner of whatever that thing is because now you know exactly how it works, so if you do need a professional to come out, you can speak intelligently about that thing. You're educating yourself, so now you just added another tool to your belt, your skillset. Especially if you're talking about rehabbing a home or something like that, the more and more you do yourself, the more you can feel confident hiring out a contractor knowing what needs to be done and what it's worth, and you just become more in control. So, now all of a sudden you can build a business around something that you're very competent about.
So, DIY, I say just do it, even if you don’t want to, just for the learning experience and the tool on your tool belt, and then hire it out from now on, that’s fine, but it is such a huge deal. I didn’t know anything. I didn’t know how to check my oil when I first met my wife. She knew way more about cars than I did, and then I got to the point where I swapped out a whole engine and I can troubleshoot whatever it is, and I’ve saved us a ridiculous amount of money, and I feel confident driving around because I live on the road now. If we get stuck, I’m very confident in knowing how cars work inside and out so I don’t freak out and spend ten grand when I didn’t need to type of thing. It is multiple layers of value doing something yourself.

Mindy: Yeah, I second that wholeheartedly. It’s not just DIY stuff on your house that you can figure out on YouTube. You can figure out how to fix any part. My husband is the one who gets under the car and does all that stuff because I don’t want to, and I don’t know how. I shouldn’t say that because you’re here encouraging everybody to learn. I did change the brakes. I was very pleased with myself for changing the brakes on my car once.

Jacob: And, now you know how to, right?

Mindy: And now I know how to.

Jacob: You know how brakes work, and if you hear a squeak, you’re like, “Okay, well I know what needs to be done.”

Mindy: Well, I wouldn’t go that far.

Jacob: Well, you wouldn’t but it’s confidence building. I would say the more you do yourself, the more confident you become as an owner of any asset. Period.

Mindy: Yeah, I definitely felt awesome after changing those brakes. We had to change the light bulb in the car, and it’s this weird thing. You can’t just look at it and figure it out. Cars today, you’re not going to be able to be like, “Oh, I just pull this out and put it back in.” No, there’s clips and weird screws, but you Google it. You look it up on YouTube. How do I change the light in a 1997 Ford Explorer? Oh, here’s step-by-step. It’s really, really awesome. And, if that doesn’t work, you can go get … Is it Chilton? The Chilton books at the library [crosstalk 00:55:26]. I mean, there’s a lot of opportunity to learn how to fix anything.

Jacob: Well, and let’s just talk about education period. I mean, that’s why Bigger Pockets exist because there was not a great education tool telling the truth about real estate, and that’s why I always recommend everybody, they’re like, “Oh, I want to get into real estate.” I’m like, “So, go here and read for a while, and then come back and let’s chat about it.” Education is such a powerful tool, and books used to be the way to go because you get somebody’s 20 years of experience boiled down into a book. They want the best to come out. Now, you can just pop online and hear from somebody who’s been doing this for 30 years really quickly. Education is at our fingertips and we shouldn’t skip over that.
I think I heard a quote recently that was like ignorance is a choice now because of the internet. I love that. It is. Period. I’m okay if you make an excuse. Just admit that it’s an excuse because ignorance is a choice.

Mindy: Wow. Yeah, ignorance is a choice. I just heard that the other day. You’re walking around with this computer in your pocket all the time. Who leaves their house without their phone? Nobody, right? My kids, who are very angry that they don’t have a phone yet, but they are the only people on the planet who don’t. According to them, they are the only people on the planet who don’t have a phone and that’ll stay that way. Sorry, girls. But, you have this device where you could literally look up anything. You don’t have to be connected to a WiFi system. You could do it over … Oh, God. I’m drawing a blank now. You can do it over the air. You can still get to Google all the time. You have no excuse for not knowing something.

Jacob: Yeah, period. It’s right there. Every now and then, we’ll be trying to figure something out as a group and then I’m like, “Aw, man.” I’ll pull my phone out, and I’ll be like, “There’s no way to find out the answer to this, huh?” I’ll just shake my phone in their face. “I wish we had a way to access unlimited information. Oh, wait a minute. There it is.”

Mindy: I say that same thing, “Oh, if only there was a way to look up this answer.”

Jacob: It’s powerful.

Scott: There’s a website called Let Me Google That for You, which is a pretty [crosstalk 00:57:47]website.

Jacob: I think there’s some posts on my blogs that I actually use that. I use the Let Me Google That for You, and it sends it like, “Man, I wish I knew how to …” Okay, well here. Here’s the link. Click the link and it will literally just tell them how to search the thing they’re searching for.

Scott: How did you parlay this cashflow and DIY construction, all that kind of stuff, into the position that you’re in now where you’re able to travel the country and live on the road and that sort of thing?

Jacob: Absolutely. Again, we bought in 2010. We ended up selling in 2018. We started putting cash away. I continued to apply for promotions and we made much more than enough and we would just start to put that money away, and we were putting away a good 30% to 40% of our income towards the end, the last couple of years, but we also … Oh, go ahead.

Scott: When you say putting away, do you mean stockpiling in a bank account? Paying down the mortgage? What does that look like?

Jacob: Yeah, I ended up opening Roth IRA’s as well, so we just did the 401k’s to the match. Well, my wife was at home, so it was just mine, and then we had rolled over a few because I got promoted a few times to different companies. I rolled over a few 401k’s into a traditional IRA, and then we opened Roth IRA’s as well. So, I started putting some away for me, some under my wife’s name, as they call it a spousal IRA, so if your spouse doesn’t work, you can still open an IRA for them.

Mindy: Whoa, whoa, whoa.

Jacob: Just cash.

Mindy: Wait. I didn’t work for eight years as a stay-at-home mom, and I didn’t contribute to my Roth IRA for eight years because I was a stay-at-home mom with no income. Tell me about this spousal thing.

Jacob: Yeah, so it’s basically if you’re a stay-at-home mom, there’s an allowance in the IRA tax code that says you can contribute to a spouse’s IRA, and it’s called a spousal IRA. Whether it’s Roth or traditional, you can put away because of that exact reason. Stay-at-home mom, no earned income, but they still want to be saving for retirement, so you’re allowed to contribute that … I think this year it’s going to be $6000 into theirs, $6000 into yours and effectively double your tax advantage investment.

Mindy: Where were you 12 years ago? I needed you 12 years ago.

Jacob: This is why it’s important. You can’t go back. That’s the killer. I’m sorry.

Mindy: I know. That really stinks. So, okay, well that’s good, though. Anybody who is in a situation where your spouse doesn’t work, you can still contribute. And, the $6000 that you’re talking about is the max contribution that you can make to your IRA, so it’s not like there’s a discount for the spouse IRA. Wow. I love these episodes where I learn something like this, and then I get a lot of emails after it airs. People will send me a note, “I didn’t know that. I’m going to max it out.” My husband actually is retired, but he has income, so it doesn’t count, but once he doesn’t have any income, we can contribute to his. Ah, this is awesome. Okay, I’m sorry. Continue.

Jacob: Yes, so as long as there is earned income from one spouse, then you can contribute that amount. I don’t have the tax code in front of me right now, and it’s been a little bit, but that’s how we … We opened the one for my wife, one for me. We just started to contribute to that. And again, the great thing about the Roth IRA is anything you put in, you can take out because it’s post-tax. It’s not one of those comes out of your paychecks things. It’s after tax, so it’s almost like a double savings account or emergency fund, as well. Then, we just started stacking a money market account as well because we knew our goal originally was to just buy a bigger, better, more house. We were just going to go into a larger space because oh, now we have three kids and we’ve only got three bedrooms, and I started working from home so the office situation was a little tough.
So, we started looking for bigger, better, more and we actually looked for about a year and a half, and nothing fit the bill and we realized we needed to do something different. I think the big part for me was I was on a plane every week. I traveled a ton, wasn’t home. We had actually read this blog about just a family. Their daughters were almost teenagers and he’s like I want to go on a year road trip before they become teenagers and disappear. Our date nights instead of Netflix, we’d sit down with a glass of wine and we would read through these people’s adventures. Every week they’d do a post. “Hey, we’re on a RV and we went here.” They just bought a little Class C motor home and traveled the country for 52 weeks. He did his graphic design work on the side, and then his wife would just run half marathons all over the country. They would just explore.
It was just cool, and we got really excited about it and we’re like that would be cool someday, and then we just forgot about it. Then, during this chaos of 2017 when I was traveling a lot and we had a bunch of other stuff going on, it came to a head and one day … I don’t think my wife minds if I tell this because I’ve already written it on my blog, but she was in the shower and I just kicked open the door to the bathroom and I said, “We’re doing it. One year, we’re out of here. We’re going to hit the road.” And, then I shut the door and walked away. She was like, “What? Sorry, what?” That was late December of 2017, and then we chatted about it and I said, “What if we just sold everything and hit the road?” All she said was, “Okay.” And, that was it.
Then, if you go back to the story of our house growing and everything else, I think we were at about $200k equity at that point because the market had recovered so aggressively in the Seattle area. The Amazon effect, and Google, and Microsoft and all the tech companies, just the prices were driven through the roof and we said, “Let’s strike now. Our kids are young enough.” We’ve got a seven, five and two year old right now. When we left they were six, four and two. Or, one actually. And, we had the equity. They were already homeschooling. We were like, “Let’s just do this thing.” I was like, “We’re going to blow through savings and I won’t have any income.” She’s like, “We need this. That doesn’t matter because we just need to get away.”
So, I ran all the numbers and I was okay. We’re going to go through about 40% of our equity, maybe about 45% by the time we’re done including the truck and everything else, so we’ll still have a chunk of savings when we get back, but it has been the most incredibly freeing things we’ve ever done. We’re never going to go back to normal again. So, we’ll see what happens but to answer your question about walking through the process is the DIY we did was the kitchen and then the whole upstairs. We did all the floors, the trim, the doors. We painted the entire house, the whole thing, two weeks before we listed it. Then, we did a bunch of DIY in the backyard. We hand laid a couple of brick patios and a pergola, and we did a new fence. All this stuff, but that was just all over the years, and we made sure that anytime we put money into the house, we knew it was an equity building thing.
I would always go online and just say okay, is this something that actually makes it money back if we’re going to make this improvement? We didn’t do the bathrooms because the time and stuff that we would need to do those things, we wouldn’t get enough back for it to matter because we just needed to get the thing listed at that point. But yeah, we were able to grow the thing to like I said about $200k in equity when it was all said and done minus some fees, of course.

Mindy: Yeah, well that’s awesome. Okay, number one, let’s go back to you kicking in the door on your wife. You are so lucky to have such a wonderful wife who is on the same page as you, and that’s as a wonderful wife who is on the same page as her husband, who should count himself lucky. That’s huge. Money is the number one thing that couples fight about, and to have somebody on the same page is just amazing and you should go tell her how wonderful I think she is, and how wonderful you think she is.

Jacob: Oh, well thank you. I will.

Mindy: That is huge, and if anybody’s listening right now and they’re dating, and they’re not on the same page, take a step back and really, really, really look at your relationship because this is presumably the person you are going to spending the rest of your life with. How many fights do you want to have? Scott, you are not married. If you and Virginia fought every minute of every day, I would tell you stop dating her. Do you guys fight every minute of every day?

Scott: No.

Mindy: No, because you have somebody that you get along with. I never understood these people who just continue to date people that they fight with all the time. I’m sorry. That’s a tangent. I’ll get off of that soapbox.

Jacob: Yeah, you’re right. I’m going to just jump on that train because money affects everything. Period. Money’s a tool. Money’s not this thing that’s inherently good or evil, but it is a tool that reveals your priorities and you put it where it’s important to you, and if you can’t be on the same page as far as priorities, goals and those core things, you’re going to make 10 to 15 decisions a day that is going to grate at that other person because underlying it is, “Why’d you spend money on that? Because, you know this is important to me. Why would you do …” It will never go away, and like you said, is the number one reason all those fights continue to come up and get worse and worse.
I always tell people … I actually just wrote about this about getting your spouse on board with a budget, but even before they’re a spouse, just figuring out priorities and goals in life is sit back like I say, crack a bottle of wine … Make it a good wine. Get a pinot noir from Oregon, something like that … and sit down and just talk about those big, huge, impossible dreams and say, “Hey, what gets you up in the morning? What’s awesome about life that you want to go for?” Then, you start to align those things and all of a sudden, you guys are on the same trajectory. You’re heading toward the same destination, and then the road map is just okay, how do we get there? Your budget is like your GPS. It tells you how to get to the place you’re trying to go to, but if you’re both going in different directions, you’re going to end up in Boston and they’re going to end up in Florida.
That’s not going to work, right? Because, the whole time you’re going to be pulling at each other. “No, come to Boston.” “No, go to Florida.” I’ll stop with the metaphor now, but basically, you know what I mean, right? You got to make sure you’re heading in the same direction first, and then the budget just reveals okay, here’s how we get there. Budgets can be fun and empowering, and for my wife and I, it was a huge bonding thing because it was okay, now it’s settled. It’s on paper. Now, every decision we make about money throughout the day, we’re both on the exact same page so I don’t have to question her, she don’t have to question me. We don’t have to fight about it. It just is. So, then when we talk about money, it’s okay, well we both the bulk of where we’re going and what we want to do. Can we pivot here? Can we pivot there? Can we adjust here? Cool, let’s compromise, let’s work that out.
If you’re not on the same page about money, it’s going to be a huge burden.

Scott: Yeah, I think everyone’s going to have disagreements, but it’s important to be on the same page about exactly this, the big things that matter to you guys, and then yes, like you just mentioned, all those little decisions … Me and Virginia, all of the little decisions that we make tend to be in the same area and overlap with the values that we share around life.

Jacob: Exactly, that’s it. So, yeah, my wife was on board. I’ll say she’s way more adventurous than me. She’s got the gypsy spirit, heart of a hippie. She just loves the open road, so she probably would have said yes five years earlier. She was ready to go, but it just came to this head, and then again, the equity and the fact that we were already homeschooling and everything else just lined up. I think the biggest thing for me, I was worried about career suicide. I was just like I’m going to plummet everything I’ve built over the last 15 years, so that was the scariest part for me was actually quitting my job.

Mindy: Okay, so what did that look like? Because my husband also had a very difficult time quitting his job, and we actually had hit our financial independence number, then we doubled it, and then he still … Oh, wait. Did we double it before he … Ugh, it’s been so long I don’t even remember. I think we doubled it, and then he still couldn’t quit. It was so difficult for him. How did you overcome that hump?

Jacob: It was weird because for me, we’re not long term FI in any way, so I’ve got to earn some income and I’ll be building the business to do that. It was one of those things were I knew that we had the equity. We already had savings so that we could transition out. It’s hard to say. I think it was just I psyched myself into it basically. It was like I’m doing this thing, and mentally I’ve already lined up all the boxes in a row to get there and I just got to say the words. So, I think I mentally quit my job maybe a week before I actually did it. I was trying to live as if I had already done it. Not that I stopped working, but I had already been like, “Okay, this is my life. There’s no if’s, and’s, or buts. I’ve already bought the RV. We’ve sold everything we owned and we’re getting the house on the market.”
I did all the pre-work of literally the only thing that’s left is to put in my notice. So, that probably made it easier, the fact that I was sitting in a house that was on the market and our house was basically empty. I think that helped a lot. So, then, it was like there’s no going back. I’m not going to re-buy my stuff back from everybody on Craig’s List, and my house was listed and we’ve got an agent involved. We’re under obligation to that, so that pushed me over the edge. It probably would have been harder if I did not have those things in place. But, I gave three weeks notice and they were like, “Please don’t.” I was like, “This is already decided. Let me know how I can help.” Then, I just did a kick butt job of helping them transition as much as possible. I wrote down everything I know, put every client in a spreadsheet and said, “Here’s all the details about every deal.” That kind of thing.
It wasn’t that hard. I think it was because I forced myself into it. I shoved myself over the edge by getting all those other things in place.

Mindy: How long is your road trip? Do you have a set amount of time?

Jacob: That’s a fun question. It’s a question we get a lot now that we’re on the road, and when we come back to places with people we know. The original plan was to leave on August 2nd, which was our 10 year anniversary. We missed it by two weeks. We ended up leaving on the 17th, but then we wanted to get back on August 17th. Do a full year. I wanted to hit the reset button. I wanted to just hang out with my kids way more. I just wanted to be present 24/7 for a full year with my family while we explore the country in this crazy road trip. So, we are 10 months in, and August 17th is our end date. My wife signed up for a triathlon that date as part of her personal growth. She’s running in a triathlon because she’s amazing like that. So, that’ll be our culmination and then we’re probably just going to keep going because it’s changed everything about our perspective on life.
It’s hard to explain, but we’re probably not going to stop after the one year mark.

Mindy: Do you have any income coming in right now?

Jacob: Nope.

Mindy: Okay.

Jacob: I have some. Obviously, again, I’m passionate about helping people with money, so I started doing a little bit of coaching, paid-for financial coaching and getting people on a plan. As the website grows, there’s ad revenues and other opportunities there. You know how websites work. I want to build that into a full-time business, so I’m probably going to do some freelance work as well. I used to do writing for other websites, and again, I could talk about money forever and ever and ever and ever, so I’ll probably start by ramping up that and then hopefully grow the coaching business and everything that goes with that. I’m still passionate about it.
I quit doing it for three years and I jumped right back in a couple months ago and I still love it. The income, we’re moving around so much now it’s hard to really focus. We’ve moved on average every four days for a whole year, so it has been insane, but yes, starting on August 18th, the day after our one year, I’m 50 hours a week into the business and we’ll see if we can float it from there. If it all goes to crap, I’ll get a job later but I really don’t want to.

Mindy: Okay, well Jacob, this has been super awesome. Thank you so much for sharing your story with us. We’ve been running pretty late because it’s just a really fascinating story, but we have one more section left over. We have the Famous Four. Are you ready?

Jacob: Da da dum.

Mindy: Da da da. These are the same four questions in one command that we ask of all of our guests. Number one, what is your favorite finance book?

Jacob: I’m going to get hate for it. I don’t care. I still love the Total Money Makeover by Dave Ramsey. It’s just effective. The dude’s funny, common sense. It’s simple and it’s really easy to understand. So, I do like that book.

Mindy: You’re not going to get hate for it. That’s a great book.

Scott: I got no hate at all for that book. It’s fantastic. We already went over this. What is the biggest money mistake you see people make when they’re starting out in budgeting?

Jacob: Well, I think that the problem, it’s twofold. They think that a budget just means they can’t have fun anymore, so they just revile it. They hate the word budget. It’s like a swear word, when budgets actually equal freedom. All of a sudden, you get to tell your money where to go instead of just blowing it on stuff that doesn’t matter. And, then the other thing is they don’t stick with it because they fail, but like I said, you’re going to fail for the first three or four months anyway, so embrace the failure I think is going to be your key to that.

Scott: I love that. The act of reshaping your life in spending for me also, as you guys mentioned this earlier, but for me also it was just a several months, maybe almost a year long intentional grind to get to that end output of my savings level that I wanted. So, it’s certainly not an overnight thing like you could just turn the switch and it’s gone.

Jacob: No, you’re reshaping your mindset and your habits and that takes time. Growth hurts. You got to prune off the old dead stuff and let the new stuff grow, so yeah, give it time.

Mindy: What is your best piece of advice for people who are just starting out? And, that’s the next question but the answer to the other one morphs into this one.

Jacob: Yeah, don’t get a car payment, and if you’ve got a car payment, get out of it as fast as possible. Sell the car. I don’t care what you have to do, run from it. It is the number one wealth killer, so stay away from car payments forever.

Mindy: Yeah, can not agree more.

Jacob: By any means possible.

Scott: Love it. All right, what is your favorite joke to tell at parties?

Jacob: Today, my son asked, “Can I have a bookmark?” And, I burst into tears. Eight years old, and he still doesn’t know my is Jacob.

Scott: Ah, nice. I love it.

Mindy: That is horrible.

Jacob: It’s awful.

Mindy: I know. I’m going to use my crystal ball and look and see, “Oh, Scott’s going to use that joke on his kids.”

Scott: I am definitely going to use that joke.

Mindy: Future kids. He doesn’t have any kids right now. Okay, Jacob, tell me where people can find out more about you.

Jacob: Yeah, so I’m still rocking and rolling over at iHeartBudgets.net, personal finance website about budgeting, saving and all things money. You can find me on Twitter and on Instagram and Facebook, all the same thing, all @iHeartBudgets.

Mindy: We will put all of those links in the show notes, which can be found at BiggerPockets.com/MoneyShow85. Jacob, this was awesome. I am a little jealous of your RV trip, although when I do take road trips with my kids, they fight. I don’t know if you ever saw … You guys are both way too young to remember the Itchy and Scratchy show on Ren & Stimpy?

Jacob: Oh, yeah.

Mindy: Oh, okay. Their theme song was, “They fight, they fight, they fight, they fight, they fight.” I’m like oh, that was writing about my children just well in advance.

Scott: You mean from the Simpsons?

Mindy: Is Itchy and Scratchy from the Simpsons?

Scott: Yeah, isn’t it?

Mindy: Oh, I thought that was from Ren & Stimpy? I don’t want any of that anymore.

Scott: When Itchy and Scratchy came on, my dad would cover my eyes so that I wouldn’t be able to see the violence. I was allowed to watch every part of the Simpsons except for Itchy and Scratchy.

Mindy: I love the things that parents cover your eyes for, and then you’re like, “Yeah, but I’m at my friend’s house and their parents aren’t home, and I’m watching all this stuff.” Or, hearing it or whatever. That’s funny you couldn’t see them fighting. Did you fight with your brother, Scott?

Scott: Yep.

Mindy: Yep, all the time. All the time. I am mostly jealous of your trip around the world. Country. I guess it’s just the country. You can’t really drive to-

Jacob: Currently. We haven’t gone Canada, Mexico yet, but there are plans.

Mindy: You can’t drive to Europe. Not very far. Okay, Jacob, thank you so much for your time today. I really appreciate it, and we will send people to iHeartBudgets.net. You’ll have to tell us how it goes year two.

Jacob: Absolutely. Well, fantastic talking with you guys. Thank you for having me on.

Mindy: Great.

Scott: Thank you, Jacob.

Mindy: We’ll talk to you soon.

Scott: All right, that was Jacob from iHeartBudgets.net. Mindy, what’d you think?

Mindy: I am so excited to have Jacob on. He was one of the first people I met when I went to FinCon my very first time, and he’s always the first person I see when I get there, and it’s just really nice to hear his story and learn his background. What a great story, and what an easy, repeatable, here’s are steps to make it happen example of how you too can get to financial independence.

Scott: Yep. Again, I think that the key thing for me is repeatability. This is something that a lot of people can do. Again, this is two hourly incomes for most of the story that are getting them in there. It doesn’t sound like he was making a salary above $50,000 until maybe eight or nine, 10 years into his career. And through all of that, he was able to save, invest and build net worth enabling this freedom right when he has three children to rear as well. That’s the point at which he has the most freedom here, so I think it’s just a great story of discipline and how that discipline and that budgetary constraints, like he mentioned, enabled him to be free rather than were a cage or constraint around him.

Mindy: Yeah, yeah. I just absolutely love that. This episode went really, really long today, Scott, so we should say goodbye.

Scott: Okay, well let’s get out of here, Mindy.

Mindy: From episode 85 of the Bigger Pockets Money podcast, he is Scott Trench and I am Mindy Jensen and we are saying Hasta Manana, iguana.

Scott: Nice.

Mindy: I hope that’s proper Spanish because that would be … I don’t know, I said over and out forever and I still get people telling me how bad that is to say.

Scott: We get mixed results from the over and out. Some people don’t like it, some people love it.

Mindy: Yeah, and that’s the thing. They’re like, “Oh, I don’t care.” I don’t want to be disrespectful. Clearly, I was not in the military. That’s all. Nobody accuses me of pretending that. Okay, this was great. Goodbye.

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In This Episode We Cover:

  • Jacob’s money story
  • Inherited $100K at age 18 and blew it very quickly
  • The moment he realized to get serious about money
  • His lifestyle before and after he read Dave Ramsey’s book
  • How he changed after tracking his spending
  • The power of getting on a budget
  • How to set goals that you can actually achieve
  • What they did after their wedding and honeymoon
  • What their lifestyle looks like living in Washington
  • Purchasing their house
  • Talking about their payment and savings after buying their house
  • Being a tax professional
  • The power of DIY
  • Made a choice to quit his job, buy an RV, and hit the road
  • What a spousal IRA is
  • Their formal budget and money dates
  • The importance of having a wife who is on the same page as you
  • Reshaping mindset and habits
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Education is such a powerful tool.” (Tweet This!)
  • “When you don’t have goals, you never have to fail.” (Tweet This!)
  • “The more you do yourself, the more confident you become.” (Tweet This!)
  • “Ignorance is a choice.” (Tweet This!)

Connect with Jacob

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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