6 Income Streams with a W2 Job and 4 Kids: Finance Friday

Mindy:
Welcome to the BiggerPockets Money Podcast show number 160, finance Friday edition, where we interview Cort Johnson and talk about FI with a big family.

Cort:
Really, it’s playing to your strengths if you are going to do something like that. You don’t just do it and buy a bunch of cheap headphones or something. That’s the thing that people do a lot of when it comes to that. It’s you play to what you know. Where have you worked? How can we help people? Because while you worked, you knew that this was a problem. When I worked as a welder, there were certain things that I knew would make my job easier, and now I’ve found those things and I’m trying to get into those people.
I think when it comes to maybe growing a business or doing something, it’s, what’s a problem that you personally have had and how do you solve that? Because someone else probably has the same one.

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

Scott:
That’s only an average introduction, Mindy. We’ll return with a better one next time. Okay.

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

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or simply get ahead with a family of six. We’ll help you build a position capable of launching yourself towards those dreams.

Mindy:
Scott, we are back with our second episode of the finance Friday edition of the BiggerPockets Money Podcast. I’m super excited for these because this shows listeners how other people are handling their finances. We go through and we look at your income, your expenses, where you are investing and make suggestions based on our multiple decades of experience handling money. My attorney makes me say, the contents of this podcast are informational in nature and are not legal or tax advice.
And neither Scott, nor I, nor BiggerPockets is engaged in the provision of legal tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal tax and financial implications of any financial decision you contemplate.

Scott:
That’s right. Mindy and I are just entertaining you not informing you. Now, let’s go talk to Cort about how he should manage his money.

Mindy:
Cort Johnson, welcome to the BiggerPockets Money Podcast, finance review episode. I’m so excited to talk to you today. How are you?

Cort:
I’m great. Thanks for having me on the show.

Mindy:
This is going to be a lot of fun. Cort Johnson is a married father of four. He is an industrial engineer and to correct Scott from episode 149, where he says that nobody likes to track their money, Cort positively lives for it. Cort’s wife is a stay-at-home mom, but they have six sources of income. Let’s take a look at your finances. Let’s talk about your income, and those six streams of additional income or five streams of additional income. I guess you count one as your W2.

Cort:
Yeah. When I first read the quote or the saying that, “The average millionaire has seven sources of income.” I thought, well, if I want to be a millionaire, I have to have seven sources of income, so I made that to be a goal. One of the things that we’ve tried to do is to diversify where our income is coming from and those are really small sources. The majority of our income does come from my W2 job as an industrial engineer, but we do a lot of things on the side.
My wife is just absolutely remarkable and she’s like, “I’m going to be a stay at home mom. This is something I want to do to our four children, but I want to be a stay at home mom and earn some money. What are some ways that we can earn some money?” We have done, it seems like everything under the sun, but it’s funny, one of our prime sources of income or primary sources of income outside of my W2 job is we actually raise rabbits for 4-H. In doing that, we’ve been able to have some months where we make a couple thousand dollars just depending on 4-H shows.
Now, with the pandemic here, they’ve slowed down, but other months we’ve been able to earn just a few dollars and we use that as some of our fun money. That’s one of our other sources of income. The next source of income that we have is we actually started an online drop shipping business. We recently did that during the pandemic when we thought, well, people are switching to online, what’s something we can do while we’re sitting in bed after we put the kids to bed that doesn’t entail us just sitting there watching TV? How can we improve our life?
We’ve been able to earn a little bit off of that, although it’s still getting started, so it’s a little bit of a slower one. Third source of income that we have is, before I got a degree, I was a welder. Still on the side, I post on Facebook and Craigslist and I say I offer welding services to people. That technical skill that I learned way back in high school, I’ve been able to use on the weekends and I use it to get us a little bit of extra fun money. Then the next source of income that we have is we started saving some money and using it to invest.
We’ve earned a little bit in dividends, and when I talk about the seven sources of income or the six that we have, most of them are very, very small amounts, but we’re hoping that those will add up. Then we also rent out a trailer, and this is something new that we started because we live in Idaho. We rent out a camp trailer, and the reason why we do that is because I have a friend who once the pandemic started, everybody went camping and he made $6,000 this summer, so we decided to rent out our trailer.
We have a lot of sources of income. Most of it comes from my W2 job, but we do a lot of little things on the side that contribute to the life we’d like to live too, so they’re not really burdens for us to do those.

Scott:
Awesome. How can we get a ballpark understanding of your income from your W2?

Cort:
Yeah. I make about $70,000.

Scott:
Great. And then what are your expenses? Well, can you walk us through those and let us know on an annual or what does that 70,000 translate to monthly and what are your monthly expenses? Maybe that’s a better way to think about it.

Cort:
Yeah. Monthly, just under $6,000 a month, I do sometimes get bonuses and usually actually my bonuses have made my income a little bit higher recently, but then as far as our expenses, we are typically right around $5,000 a month for our expenses. I keep track of all of our expenses in an Excel file that goes back three years. I can say that pretty confidently, that we are about $5,000 for expenses.

Scott:
Wonderful. Within those expenses, are there… We wanted to dive too deep into them because of the fact that you track them implies to me that you have pretty good command over your budget and your spending, if it’s not consistent, but do you feel that there’s any leverage that we should dive into there or any areas that you think are important to understand in the context of your personal finances?

Cort:
Yeah. One of the things I’ve always wondered about is when you start looking at a lot of the numbers provided by, I think that the government has some different census numbers and things, the cost to raise a family, it’s really hard to find information about what other people are doing and that’s one of the reasons why I wanted to be on the show is it’s really hard to find out, “Okay, I’ve got four kids. How are other people with four kids living?” Because when I tell people a little bit about our grocery budget or things, they’re like, “Well, how do you do that?” I would like to know a little bit more about how other people are spending when they have a large family.

Scott:
Okay. So you do think that there’s leverage in your spending in particular that will help you drive your wealth position forward. Is that right, as I’m sticking to you?

Cort:
Yeah. I do think there are some areas that we can cut for sure.

Scott:
Okay, great. That’s good there then. We’ll spend a lot of time on that. I also want to walk through some of these income ideas and help with the framework around that, because it seems like you’re dedicating a lot of energy to that, and there’s probably some leverage there between you and your wife as well. Can you walk us through your assets and debts?

Cort:
Yeah. Pretty typical family, I would say. We consider one of our bigger assets to be our 401k and that’s something we do max out every single year. I haven’t spent a lot of time learning about investing older than about the last three years and so. I still don’t exactly know. The 401k we have about $140,000 in that I think, and then we have about $20,000 in a betterment account. Again, one of those things, I didn’t know a lot about investing. I found this is a nice easy way where I could just put money in and not have to think about it.
We do have about $20,000 in the betterment account. Then, I don’t know if we want to call it an asset depending on, but we have our house with about a hundred thousand dollars in equity in our home. Sometimes assets sometimes liability just depending on who you’re talking to right there. That’s what our asset allocation looks like. Then as far as cash in the bank, we keep her about three months. The reason why we keep a pretty low amount is because we live in an area with about a 2% unemployment rate, and because we do have so many skills, I can get a job almost anywhere as a welder and still maintain our family.

Scott:
Great. That’s awesome. Any debts against that?

Cort:
Yeah. We have our mortgage and then we do have one car payment that is about, I think it’s $286 a month, and then we do have a payment on our camper. Again, we have the cash maybe to pay both of those off, but because of our financial situation, we got such low interest rates. We were trying to decide if it was worth paying those off or not. And because we do use the camper as an asset, since it is sitting there, and it does earn us money some months, we decided not to pay that off right away.

Scott:
Great. I guess the big question here is the specific goal. What is it that you’re looking to achieve and what’s your timeline for that, with your finances?

Cort:
Yeah. I discovered the fire community about three years ago. I was a little bit late to the game. I discovered it when I was 30. I’m 33 now. I already had three kids at that time and I thought, “Boy, I don’t know if I can do all the things that the fire community is doing.” But I was like, “This sounds really, really cool. These are my kind of people, even if I’m late to the game, I discovered them maybe a little bit late.” Again, not that late because I’m only 33, but what I’d like to do is be able to spend more time with my family.
That’s my priority is okay, how can I spend more time with my family and make sure that my children have the kind of life that maybe I didn’t have growing up? Because I grew up in a single income, single parent family where my mom didn’t have a lot of time with me as a kid. I want to be able to have time with my children is my number one goal of my finance journey.

Scott:
Awesome. Love it.

Mindy:
I have some questions. You said that you have a rabbit breeding business for 4-H and 4-H has been affected by COVID. Is there any opportunity to increase this to other avenues? I know that some people eat rabbit, so is there any opportunity to breed rabbits for local restaurants or something like that?

Scott:
This is so nice [inaudible 00:11:36]. Sorry. Do a lot of people eat rabbit?

Mindy:
I don’t know. I don’t eat it, but some people do. I’m not here to judge people who eat rabbits. I’m here to help Cort find more places to generate income, or is there another animal that you could breed to generate income?

Cort:
Because I live in city limits and I live on about a quarter of an acre lot, I can’t get a lot of other animals, but I’m glad you brought that up, Mindy, about possible meat sales. I didn’t want to say that maybe without somebody bringing it up first. But yes, I make a lot more off of the 4-H animals and I like that because then it gets the kids involved. But the ones that I don’t sell to 4-H, I actually have a local person who takes them to a butcher and he will take them for about a $1.50 a pound.
So no matter what I do make money off of them, but I’d rather sell them for 30 or $40 to a 4-H person that’s going to use them and win prizes than sell them to the butcher, but yes, the butcher will actually buy them from me. No matter what, I can at least earn about 5% over my costs at the lowest.

Mindy:
Okay.

Scott:
I made a couple of mistakes here. I’m humbled here with that. I’m sorry I didn’t realize that was a thing and wow. Yeah, there we go.

Mindy:
Scott’s a city boy.

Scott:
Yeah.

Mindy:
What about chickens? Are there any restrictions on your house, in your area for chickens? Because eggs are a big source. I don’t know about Idaho, but in Colorado I can get farm fresh eggs for the low, low price of seven dollars a dozen, which is ridiculous in my opinion, but I’m not getting farm fresh eggs, and I live in a neighborhood that doesn’t allow chickens.

Cort:
I actually petitioned our city council to allow chickens, unfortunately, they only allow four, so we do have five because we just had one that I assumed at that, but yeah, we do have chickens as well actually, but the eggs are such a small amount that I almost didn’t consider it income.

Mindy:
Okay. Do you sell the eggs?

Cort:
We do.

Mindy:
Okay.

Cort:
Or trade them. We sell them or trade them for other things.

Mindy:
That’s a good trade off. I don’t even mean to make a joke like that, Scott. And you said that you’re drop shipping items online. What is it that you’re drop shipping?

Cort:
We’ve mostly started with outdoor gear. The really cool thing about drop shipping that we learned and we just picked this up during the middle of this pandemic because we just thought, “Wow, this is where the market is headed, it’s eCommerce.” The really cool thing that we’ve learned is that you really want to just, when it comes to drop shipping drop ship what you know. We do outdoor items because we live in an outdoor area and that I do well in supply items and I’ve actually had a lot of good success selling welding supply type stuff and industrial stuff because of what I know.
I know outdoors and I know welding, so those are the things that we found do well. My wife knows things that mothers like, so she’s doing well with that.

Mindy:
That is probably the best piece of advice if you’re looking to start a business or a drop shipping business, do what you know, don’t try to go do something weird that you’ve never heard of, but you think it might make money because you could be stepping into a big pile of rabbit dung. Sorry. I’m not as good as Scott.

Scott:
I think it was great. I’m trying to think of that was you kicking out the jokes. Okay. Moving on from these bad rabbit puns. On the income front, if I’m zooming back out here and thinking through this, it seems to me you have the right mentality, I love it, around wanting the seven income streams and getting towards those. I have personally have about seven income streams with that and I think it’s a great goal to move towards that, but it appears to me, and I want to get more context in this that it might be better serving to focus really heavily on one and getting that to be meaningful, stabilizing it, and then moving on to the next one and the next one and the next one at that.
Is that how you’re approaching it or are you trying your hand at a bunch right now and seeing what sticks or what’s the goal there with these income streams?

Cort:
I would say, Scott, you’re probably right the way we should do it, we should probably focus on one. We tend to move around with those quite a bit. Now, the rabbits we’ve been doing that for about 11 years, the welding, obviously I’ve been doing that all throughout. These are things that I feel like I’ve mastered, but not learned how to scale and that’s the really critical part. These are all things that I can do them, but if I stopped doing them tomorrow, there goes the income. They’re really not very passive.

Scott:
Which one of your income streams that you’re approaching right now, or do you think has the potential to be scaled and made passive within the next year or two?

Cort:
Within the next year or two, I wouldn’t say maybe any of them. Ultimately, one of the things I failed to mention in my goals is I’d like to own my own fabrication shop. That’s one that I think within the next 10 years has a really good chance of becoming a lifelong way of earning money. Having people work for me, teaching people and doing some fabrication there. That’s probably the one that has the biggest potential in the shortest amount of time, I would say, due to my circumstances.

Scott:
Great. Okay. What I’m gathering here is that your main source of income is your job. Everything else can contribute and sometimes you do get nice boosts from it, but it’s not really your path out. It’s not really your path towards accelerating FI in a meaningful way. This potential business is really what you think is your potential to accelerate your financial wealth as your big bet at some point in the future. Is that a good summary?

Cort:
Yeah. What I’m trying to do is develop enough to replace my W2 job now so that I don’t have to worry if I were to go out on my own and be like, “I can’t feed my family.” Because that’s the most important thing to me right now.

Scott:
Walk me through with the welding, is that effectively trading your time for money, in doing welding, specifically?

Cort:
Yeah, absolutely. I charge people generally an hourly rate and it does really well, but it would be really nice if I was the one teaching other people how to do the welding so that they could be the ones to go out and trade their time for the money.

Scott:
Love it. Let me ask you this, if you were to do welding full-time right now, what would that look like from an income perspective? Have you thought about that?

Cort:
Yeah, if it was just me, good chance I could go out there and probably make 80 to $90,000 a year. Just me by myself, that’s a pretty realistic number there, but that’s about the limit you’re going to get with that.

Scott:
Okay, great. Thank you for that. It sounds like you do have multiple career options right now. Then, again, just asking about the income side, because it seems like there’s some leverage here, but not a chance to double it in the near future meaningfully or whatever, and that the way to do that would be to begin working towards this potential goal of starting that business that you just outlined. Is that right? Am I right in thinking that in terms of how you’re assessing the situation?

Cort:
Yeah. I think you’re right there.

Scott:
Okay, great. I think from my perspective, that brings us back to the expense side of the equation. And the reason for that is it seems like if that’s the goal, if the goal is to spend more time with the family and potentially build this business or build towards a business, then by cutting back on the expenses and building up that nest egg and making sure that you are very comfortable with moving towards that thing of, when is… I don’t know. I’m making this up right here, but I’m assuming several things.
It sounds like there’s a trajectory coming together of moving generally over the next couple of years in the direction of being able to start that business and piling up enough funds to have a good capitalization for something like that. Is that generally right? Am I putting that together correctly?

Cort:
Yeah. Part of the reason why we do so many little things is we’re all we’re trying to contribute all of these little things either in cutting our expenses or increasing our income slightly so that we have enough so that, you talk about in your book, the financial runway, basically, so that if I start a business that doesn’t work for the first year or two, which is pretty standard, we wouldn’t be left out on the street.

Scott:
Love it. That’s a really crystal clear vision, and I think it’s fantastic with that. From that, I love it. You’re doing all the right things, conceptually with this on both sides of these. We’ve just dived into the income front and it sounds like you know what to do there in order to optimize your income, keep trying these different things, really think it through, what’s scalable, what you can focus on, what can either generate a ton of income in the short run, or could provide scalable income in the long-term to offset that and keep saving up that money. Do you want to turn to expenses here and walk us through what you’re spending there and how we can get going on that? Or Mindy you have a question.

Mindy:
Yeah. I want to jump in really quick here, because I think that we might be missing a bit of an opportunity in the drop shipping aspect. The rabbit thing seems to have been put on hold, but it also seems like you recognize this and aren’t investing a lot in baby rabbits, or however you get rabbits to continue selling them right now, but drop shipping for those who aren’t listening and correct me if I’m wrong, Cort, but drop shipping means that you don’t take possession of the product. You sell it through some other third party website, and then somebody ships it to that person, and you don’t have a garage full of welding supplies that you’re trying to sell. Is that correct?

Cort:
Correct. You talk to wholesalers and manufacturers and then they will ship it out for you and you set up a business need with them. You have to set up an LLC and be official, and once doing that. Then you send it up and just say, “Hey, I’m going to be fulfilling orders. What’s your minimum order quantity?” And if it is one, then you can use that whole settler or that manufacturer to send that to somebody else and they’ll buy it off of eBay, Amazon, Facebook. Those are the big places where people are buying stuff or a Shopify store.

Mindy:
Okay. It seems like you do the setup once, and then it just keeps repeating the sales afterwards. You don’t have to continually set up the product and continually interact with customers, correct?

Cort:
Yeah, that is correct. That’s a lot more scalable than just some of the other side things that we’re doing.

Mindy:
Yeah, that seems like an opportunity to really look into that and what does it cost you to add one product to your line on eBay or Amazon? I’m assuming that it costs very little or almost nothing to add another product.

Cort:
Yeah. Just to add the item typically is a dollar or two.

Mindy:
Okay. Then that just continually sells. It’s not a dollar, every time you sell it, it’s a dollar to add the item and then you sell.

Cort:
Right and then they take the fee if it sells, but just to make a posting or a listing or something like that, it typically cost you anywhere from 20 cents to maybe two dollars.

Mindy:
Okay. That seems like an opportunity for your wife who is a stay-at-home mom to add things. Maybe you make the welding decision, so you add widgets one through five, “Hey honey, I would like these added to the list.” She adds those every week. She adds five more items or 10 more items, and that’s just another thing that could be sold that you’re not touching that you’re not doing anything with, but it’s still potentially generating income. Scott, I don’t know any place to go research this information. Do you know of a drop shipping course?

Scott:
My instinct tells me that if I Google it, I’m going to find a lot of people offering to sell information on that topic, and it’s going to be hard to tell who’s… How do you find information, Cort?

Cort:
So far, trial and error, because there is a lot people that are selling courses. We actually bought one to start and got lucky with it, [inaudible 00:23:49] but then I’ve seen a lot of other ones where people say they got burned really bad. I wouldn’t really say go and buy something off the internet. Like you said, Scott, and there’s so many people out there that think that they’re doing it semi successfully and I wouldn’t feel comfortable making a course about it even now, but there’s a lot of people out there that definitely say something that may or may not work.

Scott:
Yeah. I’m not familiar enough with the concept buying specific and then drop shipping business line there, but I am interested to see, Cort, how you feel about the scalability of that business line.

Cort:
I think of all of the things that we’re doing, that is the most scalable thing that we are doing right now that we could turn into something. And another reason why it works for us is because, I failed to mention earlier, but I actually used to manage a welding supply store. I already knew contractors and wholesalers and people. Again, it’s sticking to what you know a little bit that gave me maybe a little bit more edge than somebody who’s just researching this for the first time.

Scott:
Great. Well, my encouragement here would be to… Look, you’re doing all these different things, which are taking a lot of time, and your time is valuable. You’re an engineer when you have multiple sources of income with this stuff, make sure that you’re really being calculated about that and saying, “Hey, this drop shipping business, I’m investing my time in it because it’s scalable and it’s more or less valuable than these other income streams that I’m working on right now. I’m going to make sure that my time is being directed towards this.”
We just had a similar conversation about the value of time recently as well, on show 158, but it’s about really understanding hey, if my time is worth, I don’t know, 35, $40 an hour, and I’m not going to do $10 an hour work, unless I might work for free to build a scalable income stream later because I’m not getting value. I’m not getting paid right now, but I’m going to get paid downstream. But understanding, hey, if some of these income streams are taking too much time and the dollar per hour is too low, how do you translate that to the ones that you think are the best opportunities and set really specific measurable goals for those income streams, perhaps drop shipping?

Mindy:
I also want to explore the welding a little bit. Is this industrial welding, repair type welding, or is this artistic welding?

Cort:
The welding that I do is anything and everything for people. Generally, though, it’s more artistic. When you get into industrial, you have to have insurance and you actually have a business set up, have insurance and licensing and other things. The welding that I do is generally just people needing minor repairs or some artistic things.

Scott:
Do we want to transition to the expense side of things?

Mindy:
Yes. Let’s look at your expenses because you can’t change your finances if we don’t look at your expenses first and see if there’s anything to cut.

Cort:
Yeah, I think that that’s beneficial to look at the expenses because again, there’s not a lot of resources out there for people that have four children to understand, what do these kids really cost me and then reduce some of that.

Scott:
Let’s start with the big housing, transportation and groceries. Can you walk us through what you’re doing for housing, whether you think there’s opportunity to cut that? Have you considered house hacking and other types of things or what’s on the table, and what’s not with your housing for you?

Cort:
Yeah. When it comes to housing, we do live in a six-bedroom house, and because of where we live in Idaho, a six-bedroom house costs about $180,000. For most people, I don’t think that they’re going to be able to find something that’s quite priced that low. But one of the reasons why we got our house as cheap is we chose to live on the busiest street in town. Because of our credit scores and things, we were able to purchase a house probably twice as much as what we did buy for. We bought a house on a busy street where it was a little bit less desirable, and I feel like that has helped to decrease our housing expense pretty significantly.

Scott:
Okay, great. You have four kids; I don’t think that there’s a lot more you can really do on the housing expense that occurs to me on that front in the short run. Mindy, what are you thinking about that?

Mindy:
No, I think that that is probably going to be the be… You could house hack; do you want to move into a smaller house? No. And frankly, when did you buy the house?

Cort:
About three years ago.

Mindy:
Okay. It’s probably appreciated in the last three years, meaning other houses have also appreciated, so you’re not going to be able to get another house for less now, it doesn’t make any sense to do anything with this house right now, other than continue to live in it. I am not a big fan of buying on a busy street simply because it is less desirable and it is more difficult to sell. You will most likely sell for less, but also you bought it for less. There’s a tradeoff. Do you have a big backyard for the kids to play in?

Cort:
We do.

Mindy:
Okay. That’s better than them playing in the street.

Cort:
Yes, exactly.

Mindy:
Your, let’s see, food. I would expect a family of four to be… I’m sorry, a family of six to be having a lot of food and you’ve got a $700 grocery budget?

Cort:
Yeah. That’s groceries and toilet paper and bath soap. They’re okay.

Mindy:
That’s $175 a week. How do you live off of that? Are you eating rice and beans and peanut butter and jelly?

Cort:
No, we actually eat pretty good. You guys are asking me, because I sent my food bill over there and said, “Whoa, what happened in July?” We bought a beef cow. In doing that, we were able to buy beef for roughly, I think I spent $280 a pound and that will last us for about six to nine months. Definitely the buying in bulk is a big thing there for us. The other thing is we do live in Idaho, potatoes are free. You can find potatoes literally anywhere. A lot of meat and potatoes in our family.

Scott:
Fair enough. Look, it looks like you’ve very kindly provided a lot of this detail, so I was able to look through it and say, hey home, you’ve got some home expenses, you’ve got some mortgage expenses, you’ve got pets, you’ve got taxes, utilities. That all adds up to about 33, 35% of your overall spend there and it seems like you’re very reasonable with what you’ve chosen for your housing in terms of cost and very, very cost conscious well below your means and those types of things. There’s always ways to hack that off by even downgrading or house hacking or those types of things.
What’s what is your thoughts on that? Are you feeling pretty good about that? Or about your current housing situation do you feel like that’s something you want to explore in more depth?

Cort:
Yeah. Our current housing situation, we could move into something smaller and we’ve actually considered possibly just buying a new house every year or two and using that and then saving the other house because we are able to save as much as we save. We’ve thought about that as a house hacking strategy that we can get them all at that five to 10% down as opposed to putting maybe 20% down. We’re in the process right now of trying to find that great deal so that we could possibly do that and then keep this next house as a rental.

Scott:
I got to check my assumptions here, because it seems like everything’s on the table for you and that is one. And I love that. That’s a potentially a great strategy. You’re going to have a unique set of characteristics as a landlord with six bedroom houses, for example, in places like that. I would just encourage you to do some research, look around and say, who else is renting properties with that many bedrooms in this area? How has that different or more difficult or less difficult? There’s going to be advantages and disadvantages too.

Cort:
Yeah, and one of the things that we were looking at doing while we were here in the house is actually splitting because we have an upstairs and a basement. Splitting those into two different levels because most people don’t need that much room and then we could go ahead and split this and make it into a multifamily and do the same thing. That’s what we’re looking for with our next property currently, is we’re looking for a property that we could split into another multifamily because most people don’t need the rooms that we have.

Scott:
You rock. That’s something that I wonder if a lot of people with large families would be willing to consider it. I think that’s a fantastic thing. Again, doing the big pie chart of your expenses, this is the big one on it and if you can find a way to get a tremendous amount of that back by converting the house into an asset, every time you move, that’s going to make a major difference over a period of three, five, 10 years after you do this a couple of cycles.

Mindy:
And that causes me to rescind my comment about not liking busy streets because multifamily properties are typically found on busy streets and zoning I have found is more lenient on a busy street. The city will be more lenient with allowing you to rezone the property, in most cases. I don’t know. Have you checked the zoning on this property?

Cort:
Yeah. I have, and it’s something that we could do. Like I said, I’m trying to find a way to convert it. We have an upstairs and a basement, so I would have to add a kitchen to the basement, and in looking at our next house, we’ve been here for three years like I mentioned, our next plan is to find the next house and we won’t settle for a house that we can’t also split into a multifamily. That’s our next goal.

Scott:
Wonderful. That’s a fantastic plan there. Are you going to do the work yourself?

Cort:
Yes, and with a friend, but I am pretty handy. Like I said, I come from a welding and somewhat construction background when I was right out of high school.

Scott:
Nice. Love it. That’s going to have an… I would be interested to see, maybe that’s something that you see use where you do an analysis on your home or whatever, and you see, what is it worth today? What’s it going to be worth after I make these changes? What’s the cash flow going to be? There might be a really high dollar per hour leverage of your time in that conversion process as well. When you’re thinking about ways to concentrate your time on these income streams. Wow, turning your housing into an income stream could be a particularly big one for you.

Mindy:
I would also look into bartering your welding services with other trades men who don’t have the welding services. An electrician, if you don’t do electricity or plumbing, but I think you would do plumbing. Do you do plumbing?

Cort:
I’ve never really tried it. I unclog the toilet a lot because I have four kids and unfortunately a lot of toys end up in the toilet.

Mindy:
Don’t tell Scott, he thinks kids are easy.

Scott:
That’s right. No problem.

Cort:
No toys have ever ended up in the toilet. Never.

Scott:
Jeez.

Mindy:
Yeah. Scott, it’s super easy. Bartering your skills and services with trades people who don’t have the same skills or services is an excellent use of your time. Then you start to grow your network, and then when you have an issue, you can contact an electrician who will actually call you back. It’s nice. Scott and I were just having this conversation earlier about how it’s difficult to get a contractor to call you back.

Scott:
Yes. I think you’ve got a great plan for housing and I wouldn’t add too much to it, frankly, from my perspective about it, other than the great points Mindy made, but at the highest level, your strategy seems incredibly sound and I think it’s really effective. And I think your kids are going to learn a lot as you do this, about why you’re doing it and the power that it has over your lives. Let’s move on to car and transportation here. That seems like another big one for you. Do you do a lot of commuting for work?

Cort:
No, I can go about three miles. I do generally ride my bike most places. I know that’s a big one that people talk about, but unfortunately we haven’t figured out what… We figured it out, we just haven’t wanted to get rid of the second car yet with a large family, of course comes a large vehicle and my wife is a big fan of minivans, I’m not. Unfortunately, I should sell my SUV, but I haven’t yet because we use it to pull the trailer, but we have such a small camp trailer that our minivan could pull it.
I do plan on possibly getting rid of that SUV because when I go to work, it’s just me, and on the days where I don’t ride my bike, I’m driving a huge vehicle, even though it’s only three miles, that three miles back and forth to work adds up to, I think I’ve done the math on it. I think it ends up being close to, because of how much I spend about $3 a day.

Scott:
Okay. It sounds like there’s some room for improvement here, but it sounds like the minivan is necessary for the family. Walk us through the SUV and the numbers on that and do you have a debt associated with that, for example? Do you have a value associated with it?

Cort:
No debt associated with it. We just paid cash for it, and a two-wheel drive vehicle in Idaho is usually not recommended. That’s why we got it as cheap as we did. Also, again, it goes back to what Mindy was saying about housing. We bought a cheap house, we’ll sell it cheap. The same goes for the vehicle. It’s probably not worth much here in Idaho, but I’ve thought maybe I’d take it down to Las Vegas and sell it down there or something because it’s a two-wheel drive expedition, which in Idaho does not really work for most people.

Mindy:
It could be worth it to drive it down to Las Vegas and sell it. Although, you have a Ford expedition?

Cort:
Yeah.

Mindy:
That’s not a small vehicle.

Cort:
No, it’s not.

Mindy:
Okay. I’m telling you, sell that. Get rid of that liability. Yes. You do not need that. You can sell that in Las Vegas where they don’t need four-wheel drive, sell it and buy yourself a little Honda Accord from 1992.

Cort:
I’d even go even better than that, I’d probably just get an e-bike because I ride my bike in snowstorms and hot summer days alike.

Mindy:
Okay. Well, then ride your bike all the time. Have your wife drop you off if it’s a really, really, really awful day.

Cort:
Yeah.

Mindy:
Okay. Yes. Sell that car.

Scott:
Let me take another one here. I’m looking at the rest of your budget here and sorry, I’m trying to break this out. We’ve got categories for camping clothes, eating out kids expense and kids, wife fun, those types of things. I would lump those altogether and I’m trying to get this all out here in one thing, but we’ve got wife fun, kids fun, kids expense.

Cort:
Yeah. Kids expense is things like school related costs mostly.

Scott:
Okay. That’s not fun. Those are necessities.

Cort:
Yeah. That’s more school-related costs as opposed to kids’ fun would be things like toys.

Scott:
Okay. Look, looking at your numbers, I think I got a very key discussion point here, but we’ve got gifts, family, fun, entertainment, eating out and clothes, and I’m seeing those as a significant set of expenses here in your overall budget. Can you walk me through how you break those out or whether you budget for those or how you think about those categories?

Cort:
Yeah. This is our actual expenses here that you’re looking at and when it comes to those categories, we’re pretty minimal. You mentioned eating out, pretty minimal there, roughly $250 a month to feed a family of six is pretty reasonable, I feel like. Then clothing, we buy a lot of the kids’ clothing at secondhand stores, just because my kids are young and they don’t care. They do not care what they wear, but then when you get to the gifts, those are usually gifts for other people outside of our family.
We do have a little bit of expense there and then some of the kids’ fun and some of the family fun things are areas where I feel like we could cut because we don’t have to spend a lot just because of the area that we live. We have a lot of fun, maybe not going out and spending a lot of money, but just going to parks, going to the mountains, doing things like that. We could definitely cut some areas there.

Scott:
I think what would be helpful there is to… Hold on, I’m struggling here because you’re so optimal in a lot of cases and you seem like you’re doing so many reasonable things and leveraging the big ones that I’m struggling with what’s the best way to give you advice on how to do it other than keep going-

Cort:
That’s what me and my wife and I talk about all the time. We’re like, “We’re doing everything right.” But you mentioned in your book again, we’re doing everything right and we will achieve financial independence probably by the time we’re 50, to have quite a bit of money saved by then. I think maybe one of the things that people or with the fire movement or anything like that, they think, “I’ve got to do this by the time I’m 30.” Well, I’m already past 30. Really it’s going to happen, and me I’m like if I’m doing these optimal things for a period of 10 or so years that the nest they can build.
I mentioned that $120,000 I think that we have in our 401k. We only started contributing to that about three and a half years ago. It’s actually grown pretty quick. With the expenses, I think the number one is you look at it and realize, hey, tracking these expenses works because as we’ve tracked them, we’re still able to save money making 70,000 to 80,000 a little bit more depending on our side hustles, but we’re still able to save money for the future.
It’s going to come a little bit slower when you have four kids, but it’s still something that will come and I think that’s the message that I see right now. But like you said, it’s difficult to cut more when you have so many responsibilities.

Scott:
Yeah. Look, I think you’re doing an admirable job here bringing in 70, $80,000 a year and accumulating what appears to be 30 or $40,000 a year in wealth. Am I wrong on that directionally or is that what you’re doing with the 401k contributions and that kind of stuff?

Cort:
Yeah, you’re absolutely right. It’s about 30,000 or so that we’re saving with that.

Scott:
I think that’s incredibly impressive and that your budget here is pretty tightly kept and pretty reasonable. I don’t know what you’re thinking. I think there’s tips and tactics and you should continue diving in those, and I’m sure you’ll be able to find even more to carve out of there over time and to continue to accelerate that. But I think you’re on the right track with all that stuff. That brings us back to the income generation side of things and just being creative and continuing to take the correct shots, but with the right amount of concentration, so you’re balancing that time with your family and the income generation.
I love that you’re putting all the money in the 401k and that you’re starting to invest outside of that. You’ve got a reasonable emergency reserve with those types of things. I’m just incredibly impressed with how you run your household from my seat. I don’t know, what’s your reaction, Mindy?

Mindy:
Yeah, I’m looking and I don’t see a lot of opportunity to cut expenses. I do see some opportunity for income generation with the drop shipping and the welding that we were talking about. I really like the drop shipping business model because it’s so not hands-off, but like light hands, you don’t really have to do much and you never have to take possession of the product, which is huge. I would like to see you expand your offerings and just look at what other people are selling on their welding supply companies.
I am drawing a blank who I was talking to, they sold this one little widget for this one little tiny thing, this one little tiny niche of business, but they were the only one who sold it. So they sold a ton of it. Is there a product that’s difficult to get, that other people are having a hard time getting that maybe you could find a supplier for and crank that out or?

Cort:
Well, I think you’re right, Mindy. There’s a lot of products like that. There’s customers, people that want a lot of things. I know a guy who became a millionaire selling flagpole holders for ATVs, and that was his… He just took a piece of metal and he vented and folded it. And that was that and it worked out really well for him. Yeah, it’s finding that thing. That’s the real challenge there, is finding that.

Scott:
My neighbor has a American flag outside his house. It’s about 12 feet and I’ve been wanting to get one that’s 14 feet high for a really long period of time. If you could sell something, that’s just, hey, a little bit taller than your ne… I don’t know.

Cort:
That’s called Keeping Up With the Joneses, Scott. I don’t recommend it.

Scott:
That’s right. I’m not taking my medicine there. Look, I think that’s right. I think it’s about finding that creativity there and playing to your strengths and being really conscious about the time and thinking about that. I love that we have a good idea that sparked some creativity around selling the products that you and your peers are making around that on Etsy or wherever there might be opportunity for that. But I think that’s the key. I don’t have big changes I’d make to your investment approach, to your budget again.
And it sounds like you’re in a great income and have a high set of skills here. It sounds like you run a really tight ship and have a wonderful family and life with it. I think you’re doing all the right things as much as I’d love to give you the secret sauce that will turn the corner next year, you’re going to get rich pretty quick, if you apply this formula and if you hit a lucky stroke, not even lucky stroke, if you bring some discipline and find the right scalable business model, you might achieve that FI that much faster than your base rate implies

Mindy:
And get rid of that truck.

Cort:
Got it.

Scott:
Yeah, that’s the biggest percentage I think change you can make in your budget right now, but it’s what? It’s going to be a four or five or 6% boost to your savings rate, something like that?

Cort:
Yeah. Possibly around there.

Mindy:
Yeah. I don’t think there’s much to cut, but I think that your drop shipping idea, it can explode and go really, really far. Your wife does… What did you say she does? How did you phrase it?

Cort:
Things that other stay at home moms like. I don’t exactly know, and again, we talked about with that, really, it’s playing to your strengths if you are going to do something like that. You don’t just do it and buy a bunch of cheap headphones or something. That’s the thing that people do a lot of when it comes to that. It’s you play to what you know, where have you worked? How can you help people? Because while you worked, you knew that this was a problem.
When I worked as a welder, there were certain things that I knew would make my job easier and now I’ve found those things and I’m trying to get them to those people. I think that’s, when it comes to maybe growing a business or doing something it’s what’s a problem that you personally have had and how do you solve that? Because someone else probably has the same one.

Mindy:
Yes! Yes! Yes! That was fabulous. Okay, Court, this was really fun. This was really interesting to look into the different ways that you have started to generate income and the mindset that you have that you need to have more income streams; I think is really important for other people who are on the path to FI. Don’t just count on your W2 job. Look at other things that you know to add income and add stability to your financial future.

Scott:
No, yeah. I think this was great. I’m impressed. I’m amazed. I think you’re doing all the right things. I’m almost frustrated at how disciplined and how wonderful your approach to personal finance is and that, in by digging through it, I’m not able to find much that I think you could do to optimize it outside of what you’re currently doing given the circumstances that you presented. I think you’ve got it all on the right track. There’s going to be some tweaks, and if you stay disciplined on this front and continue to focus on that income side, that things are going to work out really, really well for you and your family with this approach.

Cort:
Yeah. I appreciate that because my wife and I, we talk about this and we talk about, what does our future look like? How do we get there? And what can we do while we still maintain the life that we want to live right now? When I told her, I said, “Hey, I’m going to be on the BiggerPockets money show.” She said, “That’s awesome.” She’s like, “They’re probably not going to be able to tell you a whole lot.” And I said, “No, these are experts. They’re going to be able to tell us everything there is to know.” And just in talking to you, Mindy, you’ve helped me to open my eyes and same to Scott, you helped me realize, wait a minute.
What are the things I’m doing that are linear versus the things that I can change exponentially, where I hadn’t thought of that approach before. Just one of the things I think that’s been so key to the success that’s maybe dumbfounded you guys a little bit is, it’s just the tracking it. When people want to lose weight, they count calories. When you want to become a millionaire, you count pennies and you just see where they’re going and then you can find a place to put them to work.
Love it. I love that and I love the exponential thing. That’s a key. Your formula right now, you should project it like an engineer linearly as if nothing’s going to change and see how that run rates and make sure that you’re on track with that, but know that if you keep doing what you’re doing, raises other sources of income, investment opportunities outside of the norm, those types of things are all going to contribute to accelerate this. You’re not as far as your model will suggest away from FI and you will get some tailwinds, I believe over the next couple of years, if you keep doing what you’re doing and applying that creative mindset to your problems here.

Mindy:
I think we have discounted the fact that he is so laser-focused on keeping track of what’s going on. When you’re not paying attention to where your money’s going, it just goes wherever. But when you know that it has to go here and it has to go here and it has to go here or when you’re tracking it and you’re writing down, “I just spent how much at the grocery store? I really need to pull back next week.” When it’s conscious in your mind, you will continue to think about it and you will continue to act appropriately with your finances, just like the losing weight thing. That was great counting pennies. I love that.

Cort:
I just made it up. I’m glad you loved it.

Mindy:
Yeah, no. That’s fabulous. When you’re on a diet, all you can think about is being on a diet and, “I can’t eat that Butterfinger because it’s this big, but it’s got 400 calories in it and I can’t drink that Coke and I can’t do all of these things.” It’s always conscious in your mind. When you’re paying attention to your finances, it’s going to be conscious in your mind. It isn’t so much, “I can’t spend money on that.” It turns into, “How much money can I not spend this week? How can I cut my expenses more?” It starts to become a game, and I think you’ve really done a good job with your game. You’ve won.

Cort:
I appreciate that. Yeah, I feel like maybe we haven’t won yet, but we’ve got a good strategy that’s winning.

Mindy:
You’re almost there.

Cort:
Yeah.

Mindy:
You will win

Scott:
You’re in this grind period. You’ve optimized, you’ve got everything together and now it’s just a matter of letting some years go by in terms of your overall formula and seeing if you can speed that up with additional, these things you’re layering in, and in the meantime, make sure that you, I think enjoy it, stop and smell the roses. Something I didn’t do my first few years of FI is I went all out. Of course, I didn’t have a family at that point, but I think that that’s the key, is you’re on the right track with this, man. I think it’s only a matter of time.

Mindy:
Yes. Cort, thank you so much today for sharing your financial picture with us and your expenses and your different philosophies. I think this is going to be very helpful to a lot of people who are listening and thinking, how can I reach financial independence with even just one kid? Well, you can do it. You just have to be conscious and track your spending.

Scott:
Yeah. Thank you so much, Cort.

Cort:
Yeah.

Mindy:
That was Cort Johnson. Scott, what did you think?

Scott:
I thought it was a wonderful show and a frustrating show for me because what I look forward to with this, is I love it when there’s a problem to uncover and to figure out and like, “Yeah, there it is. There’s the…” We’re able to identify the big problem in the picture and make a big change on it. You know what, I think Cort is really on top of it, and there’s a couple of things that we were able to uncover that will help tweak his position potentially, and maybe give them some ideas to moving forward, but there wasn’t a big set of new frameworks that we were able to hand Cort, I think in terms to overall, his financial situation.
I’m just impressed at the way he manages his finances. I think he’s on the right track with a lot of these things, and I think that he’s going to become wealthy pretty quick here.

Mindy:
I agree, and I think the word tweak is the right word to describe the advice we gave him. I think little tiny tweaks here and there are going to have huge impacts on his finances.

Scott:
Absolutely, yeah. I think that’s great and I think it was very good to review someone’s finances who’s in such good shape with that. You learn a lot. He’s probably more disciplined than me on a lot of his spending by a lot actually.

Mindy:
He probably is.

Scott:
Yeah. Great. Good for Cort and very impressive. Hopefully that helps a lot of people. If you can save 30, $40,000 or build that kind of wealth annually with a family of six, I think a lot of other people can too.

Mindy:
I could not agree more. Scott, towards the end of the episode, we told some Ninja jokes, but I don’t really like Ninja jokes because I never see them coming.

Scott:
Man, you just snuck that right in there. I love it.

Mindy:
This was our second finance review episode and we had a really great time chatting with Cort. If you would like for Scott and I to potentially review your finances, please apply at biggerpockets.com/finance review. Scott, should we get out of here today?

Scott:
Let’s do it.

Mindy:
From episode 160 of the BiggerPockets Money Podcast, he is Scott Trench and I am Mindy Jensen and we are going to hit the trail little snail.