BiggerPockets Money Podcast 11: Financial Freedom in Less Than Five Years with Joel from FI 180

by | BiggerPockets.com

Joel and his wife were barreling down the wrong financial path—saving nothing and spending more than $100,000 every year.

A freak car accident changed the direction of their lives by causing them to re-evaluate what was truly important to them. In five short years, they went from a negative savings rate to saving 85 percent of their income, allowing Joel to quit a job that was making him miserable.

They did this by making regular changes to their spending and cutting out the things that weren’t actually making them happy— alongside shedding poor investments they had previously accumulated and sticking to a strategy of simple, long-term index-fund investing.

This episode is for anyone who earns an upper-median income yet feels stuck and unable to get ahead. Joel will show you how to make the tough changes that will ultimately lead to more happiness, more freedom, and a stronger financial position.

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

Scott: Welcome to BiggerPockets Money Show, Show Number 11.

“We were kind of in this place where we thought we were saving because we were doing the 401K match that our company was doing, which was, I think it was like 5% or somewhere around there, 5 or 6%. And so we said oh, we’re doing that so we’re being responsible so let’s just have fun with the rest of our money and we didn’t realize was what it was turning into was that we were creating a lifestyle that was really not very sustainable and it was also something where a lot of our friends were latching onto us because of that lifestyle”.

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’s creation, you’re in the right place. This show is for anyone who has money or wants more, this is the BiggerPockets Money podcast.

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

Mindy: Scott, I am having an awesome day. How are you doing today?

Scott: I am doing fantastic. We just heard from one of the people I’ve been most excited to have on this podcast, in Joel from Financial 180. And I think you and I both met Joel maybe mid-January of 2018 at a very nerdy, very awesome personal finance camp down in Florida.

But I was so impressed with Joel because Joel is one of those people who came from a background of dual high income and high spending and was unable to accumulate wealth. And I think there’s a lot of listeners out there that may come from a similar position where they’ve got that income of $70,000 or $80,000 a year or more and then maybe the two of them, in the sense of two spouses are working, but yet still can’t seem to get ahead.

We’ve had so many perspectives from this show like Sarah Wilson with her low income and ability to pay off debt. This really is an episode for that other end of the spectrum with the high income, unable to get ahead. And I think they just have a really fantastic approach on how they were able to cut back on their expenses, build up hundreds of thousands of dollars in assets in four to five years and finish out the journey to retirement.

Mindy: Yeah, his story is fantastic because it shows you that you can do this. Just because you haven’t always been frugal doesn’t mean you can’t start. And I think at one point, he even said, if I can do this, anybody can do this. They were spending six figures—they were spending more than $100,000 a year. That takes some effort.

Scott: Yeah, it really is. I don’t know like how I would spend $10,000 a month but a lot of people do that and a lot of people kind of is stuck in that pattern and that’s where I think Joel and his wife was until they did a Financial 180—the name of their blog is FI 180, and were able to transition out of that and begin to really accumulate a lot of wealth, find meaning and he really enjoys his day. He just retired from his job after really aggressively starting the journey in about 2012-2013. He just finished in November of 2017. He’s been retired for a few months.

Mindy: Yeah, so what makes his story so great is they were going full speed ahead in the opposite direction. They actually did a complete 180 starting from, I think he said they had about $10,000 in credit card debt. So not enormous but definitely starting from a negative spot. And now he’s retired in five years. Yes, they were making a high income but he went from nothing to retired in five years. It’s totally doable and—we shouldn’t tell his story for him. We do this every week, Scott.

Scott: Yeah. But first, let’s hear a word from today’s sponsor. All right, support for BiggerPockets and the following message comes from Wunder Capital, the easiest way to invest in large-scale solar energy projects across the U.S. In fact, individuals like you have already financed more than 165 large-scale solar projects. These solar energy projects create enough electricity to power the equivalent of 5,000 homes which helps offset almost $75 million pounds of carbon dioxide emissions each year. Visit WunderCapital.com/BP to find out how you can begin investing in solar energy projects while earning up to 7.5% annually and also helping in the fight against climate change. Wunder Capital, where impact investing meets capitalism. That’s WunderCapital.com/BP.

Mindy: I’m so excited to bring him in. Joel, welcome to the show.

Joel: Hey, good to be here. Thanks for having me, guys.

Mindy: Thank you for coming on the show.

Scott: So Joel, you have an incredible story where it sounds like you came from a position of very high spending where you were able to kind of reverse that. Can you just start from the very beginning and talk about what was life like a few years ago for you before you got interested in the concept of financial freedom?

Joel: Yeah, so I guess the place to start would be 2007. So, 2007, my wife and I—she was my girlfriend at the time—we just graduated from university and we had our offer letters for our very first job. We didn’t even have the job yet. We had our offer letters so we said all right, we’re adults now. The first thing we need to do is go buy a house. And so, we went and we bought a house in 2007, not very good timing, we bought this house, we moved in, and we were kind of playing grown-ups.

We said okay, it’s time to furnish this house so we went and got about $10,000’s worth of furniture on credit and we just filled up this house and we kind of started living this life where we never really had money before. We were college kids and now we did and we kind of were like, man, we can do anything and everything. So we started just slowly increasing our lifestyle and it was gradual at first.

We weren’t good at cooking so we started going out to eat once a day, twice a day. We started paying for all kinds of services for things so this would be like food, prep service, food delivery service, we’d have water service, alarm service, lawn service. It just started adding up and adding up. I didn’t think it was weird at the time, right? Because a lot of my coworkers did the same thing.

So it was just this gradual creeping up and up and this continued over the years and it got to a point where 2012, we actually spent in the six-figure range on stuff. So over $100,000 spent in 2012 on stuff and that was like the pinnacle of our spending where it just got a little bit out of control.

Scott: So 2012 is the year that you got married, by chance, or what year was that?

Joel: So that was 2013, we got married. And that was a quite elaborate wedding. It was wonderful and don’t get me wrong, I don’t regret any of it. It was a beautiful day but we did things in such a way that were a bit extreme. So we got married at Disneyworld, which was awesome. But expensive. And everything was always new, over the top. New house, new cars, expensive wedding, expensive honeymoon.

We just had this thing where we were just spending money, because we could and I think a little of it was we want to get what we thought was the most out of life. And so, that’s kind of where we were. We started to realize though, through this time that something might be wrong. Like we weren’t getting the fulfillment out of the stuff that maybe we were looking for. We weren’t finding the purpose that we were looking for.

But it wasn’t until 2013—I can’t remember if it was 2013 or 2014 but my wife was in a very serious car accident and that’s kind of the catalyst, that was the awakening that kind of made us aware of a direction in our lives.

Mindy: So you just went through like 20 things I want to talk about. Congratulations on hitting a six-figure spend, yay for you. Did you throw a big party? Woohoo! No.

Joel: We didn’t know at the time. We honestly didn’t track our spending. We had no idea. It was years later that I realized that that’s what we had spent that year and it was like, a jaw dropping and hitting the floor.

Mindy: Yeah, I think I might have hit that a couple of times but that was while I was doing these like major flips and you know, you’ve got to spend $100,000 at Home Depot. So what do you do for work? Because you’re spending six-figures. I’m assuming you’re making more than six-figures? Or some sort of—are you going into debt for this?

Joel: So I can dive into that. My wife and I are software engineers or at least what I did while I was employed and we’re not making West Coast style salaries. So we got our jobs right out of college, we were making about $50,000 each and then that kind of climbed over the years towards right under the six-figure mark before I quit my job this past November, which I guess we’ll get into soon.

But that’s kind of the spread. So we weren’t necessarily going into a lot of debt. We were lucky about that. I think at our worst, we might have had maybe $10,000 of credit card debt. What we were just doing was just spending everything that came in. 2012, we actually did have a negative savings rate. So that was our worst year.

Mindy: Did you ever consciously think about saving money, oh, we should put some money away for the future or we should invest, or was it just all spend, spend, spend? Because I was a young adult a thousand years ago and I also had friends who were young adults who wanted to go out to dinner and go to the bars and just go hang out and go to concerts and I was living in Chicago at the time—and we have like 27 sports teams so you want to go see the team play and you know, it just adds up but it’s not like this conscious, how can I throw money out of my pockets fast enough? It’s more like, I just want to do what everybody else is doing.

Joel: Yeah, so we were kind of in this place where we thought we were saving because we were doing the 401K match that our company was doing which I think it was like 5% or somewhere around there, 5 or 6%. So we said, oh, we’re doing that so we’re being responsible. So let’s just have fun with the rest of our money and we didn’t realize that what it was turning into was that we were creating a lifestyle that was really not very sustainable. And it was also something where a lot of our friends were latching onto us because of that lifestyle, which was a little unfortunate.

So for example, we would be the type to tell people, yeah, come on out downtown with us. We’ll buy you a drink. We’ll buy you a round or we’ll get the appetizers or we’ll get this and that. And it got to the point where yeah, the spending was just really, really not sustainable. Really, really unsustainable.

Mindy: I wish I had a statistic for how many people actually invest in their 401K. While your story is not one that make my heart sing, you’re still investing in your 401K which is a lot more than a lot of people are doing.

Joel: Yeah, and I tell a lot of people, we were, in a lot of ways, we were very lucky. We did not come into our adult life with a lot of debt. We both had prepaid college, thanks to our parents, which was really nice so we weren’t starting with large debt in student loans. I think the most debt we had, like I said, was the $10,000 in credit card which was relatively easy for us to turn around. But it was just a matter of just every dollar that came in went immediately right back out.

We both had our vices. Mine was electronic stores. So I would go to Best Buy every Friday when I was feeling bored after work and I’d come home with a new few hundred dollar Wi-fi gizmo. That was my thing. I was buying game systems I didn’t even have games for, and I just wanted them. You know, it was just this idea of all these gadgets. People would come to my house and just be like, oh my gosh, it’s a Wi-fi crazy zone in there. Because I’d have 20 gadgets. I’d have the lights that would turn on and off with your cell phone and the thermostat and all the home automation stuff. And I just love toys. I always had the newest phones. I always had the newest computers.

That was kind of my area of spending. My wife’s was what we call the Target black hole where you go to Target and then your money goes into a black hole and you don’t know where it goes and then at the end of the month, you’re like, how did I spend $600 at Target? What was it on? And we wouldn’t be able to really like pin down—what did you buy? Oh, I don’t know. It’s just Target. You just go in and you’re just buying stuff and—

Mindy: Yeah, sorry, your wife’s not special with the Target black hole. That’s everybody who walks into Target.

Joel: I should qualify though, she’s not here to defend herself right now but she was always the more moderate one through this financial 180. So back when I was super spendy, she was a little bit more well grounded. She was a little bit more moderate. And even then, on the flipside, when I became extreme saver, pushing you know, an 85% savings rate, she was the one to pull me back and say, this is getting a little extreme. So she’s very even keeled, which is a good thing to have in a relationship. Somebody who’s on both sides, able to kind of keep a more steady footing. So I’m just a crazy one.

Scott: Going through all of this during this period where you’re spending six figures and spending everything you have, how were you feeling? Were you living the high life that everyone imagines or were you fulfilled?

Joel: No. Not at all. So actually, I didn’t realize it at the time but things were actually getting more stressful because of this unsustainable lifestyle that we had created. So we had a work schedule called a 9-80 where you get every other Friday off of work, and so we were travelling every other Friday. But a lot of the travel wasn’t international fun travels. These were weekend trips and so we would travel to go see friends and family that didn’t want to come visit us.

There was one point where we flew to the West Coast to see a friend for the long weekend, flew back to the East Coast and I remember getting out of the airport from a redeye and driving straight to work without going to sleep and just immediately getting to work. No sleep, right off of a plane, and just thinking to myself, this is crazy. What am I doing? So there was this kind of sense of we were trying to find fulfillment.

We thought that buying all these things and having all these toys, going out to any restaurant we wanted all the time, being able to see any friend or family instantly, just at the drop of a hat, go visit them. We thought that this was going to bring happiness but it really wasn’t. And we were kind of at this point in our lives—this was when I was getting close to 30 years old and I was not really fulfilled.

I was stressed out at work. And not really finding a mean, a purpose to it all. It was kind of just like you do this grind, you work hard, and then you get out and you have a few hours on the weekend to maybe play with the toys that you bought. And that was like the extent of it. So it was almost like it was not fulfilling in any way but we needed a push to kind of wake us up and that didn’t happen until my wife’s car accident.

Scott: So can you tell us about that car accident? What happened with your mindsets and what actions did you take in the aftermath of it?

Joel: Yeah, so a few months after we got married, it was around the same time that a friend actually pointed us to the Mr. Money Mustache blog. So I had been introduced to Pete’s blog before the car accident happened but it didn’t really catch with me. I kind of read the blog and I was like, this is interesting. But it just kind of was like, that’s cool. Bookmark, maybe I’ll read that later.

So then a few months later, my wife gets in this horrible car accident down in South Florida. She was visiting some family and a sheriff’s officer ran a red light at full speed and did not have his sirens on and just completely T-boned her. And she was knocked out, the car was totaled. She luckily didn’t have very serious injuries, just a few months of physical therapy but she was okay. You know, it wasn’t anything too serious.

But we just got to this point where we started thinking to ourselves, it was such an awakening, that moment. We were talking to each other the Monday after the accident. She was like, I need to go back to work but I’m not ready to go back to work. Like I’m not mentally in that place. And you know, we started talking like, man, work stinks. We just started talking like you kind of have this realization like wow, we are kind of slaves to the paycheck and slaves to the work schedule.

And so during her few days off that we had, I took some time off with her and we started reading that Mr. Money Mustache together and that’s when we kind of realized like wow, we could totally change the way that we’re living our lives. So that was kind of the awakening. There was a book Dominic Cortuccio wrote, Design Your Life. He talks about this concept of an awakening that is intentional and unintentional.

For us, this was an unintentional awakening. It happened at a good time for us before we had dug ourselves in too deep and it just completely changed the way we thought about money. So we knew within a week of that accident that we needed to change things. So the insurance company gave us a $10,000 check which was the depreciated value of her car. Her car was more than twice that when she bought it new just a few years earlier.

But we decided instead of buying a second car, that we were going to try to be a one-car household and put that money into Vanguard and kind of use that as the catalyst to the $10,000—that’s just enough to get in their admiral share, VTSX and so we used that as like the catalyst to push us forward in what was a new lifestyle for us.

Scott: That investment doesn’t seem to have worked out, huh?

Joel: It worked well. I tell you, I’m super happy we made the change that we did. And it wasn’t an easy 180 and we’ll discuss, it’s slow and steady and gradual but your happiness grows as your savings grow in the bank. It’s really kind of crazy how that works.

Mindy: So what was your first step? You and your wife was, okay, we’re going to be financially independent. So you got the $10,000 check from the insurance company. What did you do after you deposited that in the VTSX—is the index fund from Vanguard, correct?

Joel: The Total US, yep.

Mindy: For people who don’t know. So what did you do after that? So now you’re a single-car family.

Joel: So at the time we still had a horrible commute, right? So our house was probably a 40-minute drive from work so every morning, we would read a Mr. Money Mustache article together out loud in the car on the drive to work and we would talk about it and we would say, you know, is this something we could improve in our lives? Is it an improvement that we could make? And we kind of eventually turned this into a game where every single month we would aim for at least one improvement in our expenses.

And actually, at first, it was a little faster than that. At first, it was one a week because we had so much room for improvement. It was a lot of low-hanging fruit. But eventually, we got to a point, and I have a cool blog post that goes into this in detail where each month, we’d pick one thing and we would just kind of figure out, how can we improve our expenses? What can we get rid of in our spending? What’s something that we could cancel or something that we could reduce? So the first few were easy, right?

So I had the fastest internet possible. I had like 500mb/sec. This was back when—this was five years ago. There was no need for this. So I lowered it each month, I would lower it one extra notch just to see if I noticed a difference. And gradually, I got to a point where I was down to the much cheaper plan where I was paying a quarter of what I was paying before and I was still happy with the performance of the internet. We could still watch our movies and whatever that we wanted to do on it.

We kind of took that approach to a lot of things. We cancelled cable. We moved our cell phones over. We eventually got off of our data addiction where we were using a ton of cell phone data every month. And the biggest one, the one that took us the longest, was learning how to cook. So we actually had to get good at cooking food that we would enjoy, right? So it’s one thing to go spend a bunch of money on groceries and say, this is good, we’re going to spend this instead of going out to eat. But if you don’t like the food, you’re going to end up still sneaking in you know, meals going out to eat.

It’s almost like going to the boot camp that we went through where it took a few months to actually enjoy one another’s cooking and learn how to cook stuff that we liked to eat. It really did. It took a while. And something more complex than like a sandwich or a soup or something. Actual good meals. It was an adventure we kind of went on together where we had to learn over time.

What do we like? What do we not like? How do we prevent food waste? Because you go and buy a bunch of groceries and you don’t know how to efficiently make meals and you’re throwing a bunch of it out if it goes bad in a week or two and that was not quick. That was the better part of a year, probably, in turning the food situation around.

Mindy: How did you turn your food situation around? It sounds like neither of you cooked at all before? How did you eat as a kid? How did she eat as a kid? I come from a really frugal family so my life experiences are different. But I grew up—I loved to cook so this is one that really, I struggle with to understand but I know there’s a lot of other people who hate to cook, too. How did you learn how to cook?

Joel: So growing up basically, my parents were frugal by necessity, not by choice. And my mom would cook every night of the week. We would go out to eat maybe once a month and then maybe once a month, we’d go to McDonald’s for like a special breakfast or something. That was the extent of it. So my mom cooked all the time. And she was a good cook. And I took that for granted growing up. I just knew I’d get home from school, she’d say, Joel, go do your homework, and dinner would be ready, you know. Six o’clock, it’d be on the table.

I took that for granted and then you know, as an adult who just spent the better part of six or seven years eating out twice a day, every day, it was quite a like awakening in that sense. Like, wow, I can cook that. I don’t know how to take care of myself. You start to realize, you don’t know how to take care of yourself and everything that you were doing to get by was relying on your credit card.

Oh, I needed to go to dry cleaning because I can’t do my laundry, so that’s a credit card. I don’t know how to cook so I need to go buy food. That’s a credit card. So we slowly get better at it. I don’t know about my wife. She kind of grew up with her grandma living in the house and her grandma’s a really good Southern cook. She cooks a lot of good Southern food and so she probably had wonderful food growing up, I’m sure.

But neither one of us really knew that well how to cook. And so it was something we had to learn together. And at the same time, while we were learning to cook, we also had to learn how to get good at buying groceries. So if you don’t buy groceries right, you can spend a ton of money going through that. So we finally figured out that the choice of grocery store made a huge difference.

And we found an Aldi very close to where we lived at our new house and Aldi changed everything. It was half the price from where we were going before which was a grocery store called Publix. Aldi was half the price, produce, just everything that you would need, all the necessities. It was like half off. It really made such a difference for us. So that kind of came in hand with, there’s the acquiring the food and then the preparing the food. And so we had to get good at both of those things.

Scott: So how far did you go? How low were you able to get your spending after doing this?

Joel: So over the years, this didn’t happen overnight. I think the year after the car accident, our spending dropped to maybe $65,000 or maybe $70,000 from the six figure mark. The year after that, it dropped, I want to say to the mid to upper $40,000s and then the year after that, we hit the $30,000s in our annual spend and we’ve been in the $30,000s ever since. Our most aggressive, at one point, we had an 85% savings rate. That was our most aggressive. And it was a little too extreme, which my wife kind of had to pull me back from the edge because I was going crazy.

I was like, okay, new rule. We’re not going to go out using the car at all on weekends. Weekends are car-free. That sounds good if you live in the city but our house was six miles away from anything that you could walk to, but that was basically just saying weekends are going to be a recluse. That didn’t work well. It wasn’t a good strategy. I also at one point cancelled the Netflix, which she was very unhappy about.

So I knew, okay, that wasn’t one that we can do. There was a few things where I get into a lot of trouble for that one—there were a few things where we just had to try and see. So I think it was a good exercise to kind of push yourself, like too far frugal and then back it off a little bit to kind of learn where your line is because it’s different for everybody. So we did that with the gym. We cancelled our gym memberships and I’m still okay with that.

I have a really cool home gym that I’ve set up here and I enjoy it but my wife really missed the fitness classes and kind of the group atmosphere and the motivation she would get from being around other people at the gym. And so we added that spending back in maybe a year later once she realized that that was something that was really important. So once we backed away from that 85%, I think we got to a point where between 70-75% was comfortable for us.

Mindy: That’s really interesting. Last week, we had Liz from Frugal Woods on and she said the same thing. Once they discovered this amazing concept of financial independence, they cut out everything. They went bare bones and nothing and she was like, you know what? I need some things back in. I need my seltzer water. I need my yoga classes. But she also turned it into a game. And I’m hearing this a lot with all of these stories that I hear, is that we made it a game. We got the low-hanging fruit.

We made it—there’s a lot of really easy changes when you’re coming from a position of more spendy that are easy to make that don’t hurt so much. You say, oh, I need everything but then you discover, I don’t need everything. And she said, I’m going to make it a game. How can I get yoga so cheap? How can I get yoga free? Oh, I’ll just volunteer at the front desk. Have you guys done anything where you alter how you paid for things or how you acquired those things like trade or anything like that?

Joel: Yeah, so we’ve been getting better at thrift shops. That was something that took us a while to discover, like you don’t need to buy brand new clothes. We’re still getting into that—

Mindy: Just underpants?

Joel: Yeah, underpants are good. At retail. But we started getting into that and then a lot of it was just figuring out how to wait. Instead of that impulse of I need to buy this right now. So Liz talked about her 72-hour rule where she makes a list, she writes it down, she waits to see. So I find that waiting can give you the time to see, well, one, do you really want it? But then two, is there a better way to get it? Can you get it from a friend?

And so, recently, I wanted to get a new computer monitor for my office. And you know, you can go to Best Buy and get one that’s pretty decent for like $250 bucks, which doesn’t seem like that much. But I said to myself, you know, I’ve got this cool thread on Whatsapp with like ten of my friends that are like local in town. And so I just shouted it out on that. I said, hey, does anybody actually have a monitor lying around their house that they’re not using that maybe they want to get rid of or sell to me? And sure enough, my buddy had a really nice one, 1080P, super nice monitor, and I was like what do you want for it? He was like, I don’t know. $40 bucks? I said, cool. That sounds good.

So I was able to just take that extra little step instead of going through the normal routine which would normally be, let me go to Best Buy and go swoon over all the shiny new stuff. Now, I got to go to my friend’s house, hang out with him, get the monitor, bring it back and I didn’t have all the extra packaging. I didn’t have all the junk that you have to throw away that goes with it. It was just a much better way and you feel like it’s getting another life, something that he maybe would have thrown out or something that was just sitting in the closet is now getting utilized. So that was one thing that we did.

We got creative though. At one point, like you said, it’s easy at the beginning when everything’s low-hanging fruit, but then when you get to the point where you kind of optimized a lot, you start looking for little improvements. So at one point, you know, we got the low-flow showerheads and installed those and that’s a savings of maybe three or four dollars a month.

And we wrapped our hot water heater in a blanket and you know, little things like that, like the little improvements that come later. But those can be fun, too. And so it’s kind of this continuous optimization is what we’d call it in the engineering world. You’re never sitting still. You’re always trying to optimize something. Even if it’s just a small gain in your expenses.

Scott: So I always view the world through this lens, this pie chart of household expenses, because then of this pie chart, 30% is housing, 17% is transportation, 13% is food, and then 1/3rd, 33% is everything else.

Joel: Yeah.

Scott: What I love about your story here is, two of the things you discussed are one, your commute. You did not buy a second car and you turned that into a game basically where every day, you’d read a Mr. Money Mustache post or something interesting that would help you move towards your goal, and then came up with solutions during that. So that’s fantastic. And then with the food, you just began to cook. And then you made smart, rational improvements, one by one in the everything else category.

To go back to this, though, I’d love to know kind of what happened with your housing situation. Did you make any changes there or is that one thing that you didn’t touch because you were able to make such improvements everywhere else?

Joel: Yeah, so the house was one that I realized, when you look at the pie chart in Mint, the housing, the mortgage and everything else is always the biggest one. And then the transportation is also scaled up because of that 40-minute commute so that’s kind of like, it has a multiple effect on it so what we ended up doing, that house lost a ton of value in the 2007 market downturn so it got to the point where it was worth less than half of what we purchased it for.

So we did not want to walk away from it, which we have friends and know people who have done that. We didn’t feel right. It didn’t sit well with us and so we said, what else can we do? When we realized we were done putting up with the 40-minute commute and we looked for some interesting opportunities and one of the opportunities that came our way was we had a family member who wanted in on the low real estate prices in Florida to buy a retirement home but they weren’t ready to retire yet.

And so they said, hey, if you guys housesit for us in this house that I want to buy to eventually retire into, I’ll let you guys live there rent-free. We would pay for the electricity and the utilities but we would basically live rent-free and housesit for a year or two. And so we took him up on this opportunity because we said, well, that’s really cool. It’s a little bit closer to work and we’re able to rent out our previous property and then also live rent-free in the new one. So that kind of gave us a little kickstart that allowed us to save a little bit more aggressively for the paying off of our mortgage on that first property.

So I really wanted to pay off the mortgage on that first property because it was an 80-20 interest only, 100% financing arm. Which is pretty much—that’s the worst mortgage you could get. Remember, we knew nothing when we bought this in 2007. We were kids and we had no money. I think we had $300 to our names at the time. But we had offer letters that we were waving and that was good enough for underwriting back then.

So we walked away from the closing of that house with an $8,000 incentive check from the builder, right? Because the builder was like, hey, we want you to have this house. So we walked away, no money down, no money in the bank, $8,000 in hand and a set of keys. So that’s kind of the state of things in 2007.

Scott: But it helped towards furniture.

Mindy: Put that on a credit card.

Joel: That helped with the furniture, it did. Actually no, I think we had borrowed some money from somebody else. That money was gone very quick. So, we didn’t know. So that mortgage was forked.

Mindy: Yes. That’s a really bad mortgage.

Scott: That mortgage was bad.

Joel: Yes. Five years of interest only. So no principal payments were going to that mortgage at all. So I knew I wanted to get rid of it. The interest rates were insane, too, because the 20% portion, I think, was 11% interest rate and the 80% mortgage I want to say was like 7%, around 7% interest rate. And I just knew I wanted to get rid of this. And especially because at the time of the crash, the interest rates were super low. We were trapped.

And so what we did was when we moved into this family member’s house, we rented out our previous one. And it was a horrible rental, too. So forget the One Percent Rule, this thing was not cash flowing even when the mortgage was paid off pretty much. Like it was horrible. We had a high HOA. It had a low rent. So I think we had a mortgage on it of $1650 a month and we were renting it for $850 a month. So it was just horrible. But it at least helped.

Mindy: Yeah, if you weren’t renting it out at all, you would be responsible for the entire $1650 and you know, somebody’s seven years removed from that situation might be like, well, that’s terrible. Why would you do that? But when you were in 2007 2008, 2009, it was really difficult. I mean, Florida took a huge hit.

Joel: Yeah, and we bought it for a little under $200,000 and at the bottom of the market, it was valued at $70,000, to give you an idea of how far that fell.

Scott: No, but this is a really key concept. So you hadn’t mentioned this before so I wasn’t sure if this was a big part of your strategy but this is actually a major, major financial decision for you because you said $850 a month was what you were getting for rent. So regardless of what you otherwise owed, you were able to now live for free, and you’re getting an extra $850 a month. That’s the equivalent of a $150,000 investment in terms of cash flow that you’re able to generate and save on that. Because that’s all before tax, or after tax, I’m sorry—it’s just money that you’re not spending.

Joel: Right. And that did help us. It helped us quite a bit. And what it did was we were basically trying to throw everything we could at that mortgage to get rid of that mortgage and what it did was it allowed us to pay off that mortgage in under three years, which was really cool. It was something that looking back, we realized we stayed in that house a little too long because what should have happened when this particular family member, who I shall not name to keep the innocent an innocent, when they moved in with us, we should have moved out immediately.

But what happened was, I kind of got greedy and I was like, this is a great thing. Let’s see how long I can keep it going. And so this person moved in with us. They had a full house of furniture. And we should have moved out when they moved in but we didn’t. We tried to keep it going for another two years and we kind of lost our sanity a bit and potentially hurt the relationship with this family member. Just because some people have different lifestyles. This person was a retired person who had a very different lifestyle than ours at the time and so we should have, looking back in hindsight, we should have left a little sooner.

But we did. We got that mortgage paid off and we very, very quickly found a new house much closer to work, which we live in now. And we were able to actually—we moved in it with a mortgage here on this new house in 2016 and then just last year, 2017, we finally sold that rental property and used it to pay off the mortgage here on this house that we’re in now. So we now actually, we’ve been for maybe six or seven months now completely debt-free, including mortgage, which was kind of a huge step for us and it felt really good to get to that point.

Mindy: Nice. So let’s go back to that rental just for a minute. You bought it at $240K and at the bottom it was worth $70K—

Joel: Well, we got it for maybe $200K. A little under $200K. It wasn’t $240K.

Mindy: Oh, okay. I’m sorry. I misunderstood. So a little under $200K and it was worth $70K. What did you sell it for, what did you say, two years ago?

Joel: Yeah, we sold it in 2007. Summer of 2007. We did not get back what we bought it for. We ended up selling for about $140K, $145K. But it was good enough for us. We actually had—one of the things that led us to sell, we had a tenant from hell, is what I call it, and it was a really bad rental experience that happens just in the year before that and we kind of knew we needed a break from real estate and the fact that it went up to $140K took us to—it doubled from its low and we said, all right, I’m okay. It just so happened to be just enough to pay off the mortgage on the house that we’re in and so it was a psychological thing.

We’re like, all right, let’s do this. Let’s just clear it out. Zero out the debt and see what it’s like to just be completely debt-free for a little while. And so we did that and it was really nice because then we could take this cash flow that previously went to mortgages and invest all of that every month, which was really nice. So we had a—our snowball grew by another mortgage in size, our savings snowball. So that was kind of cool. But the wife is getting the itch again. She spends a lot of time on Zillow and on Trulia—

Mindy: And BiggerPockets.

Joel: Yes, and BiggerPockets as well. But from a mapping perspective, just looking at the area and looking at what’s nearby, what are the pricing norms. Are there any good deals left that haven’t been scooped up so she’s getting the real estate itch again. I’m more of the passive guy. I really like the fact that Vanguard is never late on my dividend payments. I enjoy sitting back and relaxing. She’s the more active—she really enjoys the hunt for the good property and kind of that stuff.

So I see ourselves probably doing real estate again in the next few years. Personally, I’d like to wait until I think that a lot of the deals that were there a few years ago have dried up. But my wife’s convinced there’s still some good deals to be had if you’re patient. I really know the market so that’s kind of her area of play right now.

Mindy: Well, I will agree with her. There are some good deals still out there and when you are ready to rent properties again, I will send you a couple of different articles like How to Rent Your House, How to Screen Tenants, because tenant screening can really help make that tenant from hell not be your tenant.

Joel: Yeah. It was crazy, I mean we even had a property manager at the time which ideally should have shielded us from some of this. But this guy was perpetually late on his payments. Now, he’d be in the maybe 25-day late category so it didn’t quite roll into the 30-day and so we’d charge him a fee every month, and extra $100 late fee. And so he was paying it so we were okay, but then it got to the point where he was 35 days late and the next month, it’d be 40 days late. And so it got to this point where it was like the slippery slope.

Mindy: There’s only 30 days in a month.

Joel: Yeah. So we got to this slippery slope and it was around Christmastime that I wanted to push forward and I said we need to evict. And my property manager was like oh, you never want to evict somebody on Christmas. Because it was around Christmastime. I said, look, we’ll wait another month. Another month went by, the guy was pleading with us, I have more money coming in.

But we knew something was fishy because every time we’d go to the property, he wouldn’t want us to come inside. He wouldn’t want us to go into the property. He’d be very secretive and you know, close all the blinds and not let us see. There was one point where I had to put up hurricane shutters because we had a hurricane in 2016 and he was like, oh, I’ll put them up. I’ll put them down. You guys don’t need to worry about it. Long story short, he abandoned the place.

We finally did get the eviction notice, we go in, it was pretty trashed. It required a lot of cleanup. There was really gross stuff everywhere. He stole a lot of the interior doors. He stole the air registers, the smoke detectors. It was very bizarre. I really have to this day not experienced anything like this. But it was a very long process, too. The whole thing. From the time that he started begging and pleading until the time that we got him out was maybe four or five months while the property was vacant. And then it took us another two to three months to sell it after that.

So it was a better part of the year, the whole process and we were just tired and ready to take a break, especially from that property which had a high HOA, that was unsustainable. It was far. It took is 45 minutes to get to it if we had to do anything to improve it. So I think the break was warranted. I think we learned a lot from that property. It was definitely a good learning experience but it was also was something that really taught us to be careful with what you spend your money on.

If we had rented for a year, which is, I’ll give my wife the credit. She kind of said out of college, we should rent for a year and learn the area. This is a new city. I said no, we need to buy a house. If we had rented for a year, we would have missed the downturn and bought in at the bottom. So it would have been night and day. But you know, it was a great learning experience. We still were able to turn things around so I just, I look at it as hindsigh is 20/20 and how can I use what I’ve learned going forward to my advantage.

Mindy: Yeah, that’s a good one.

Scott: You don’t hear enough of these failure stories or horror stories from real estate.

Joel: Oh, I’ve got a lot of them actually. That’s one of the things that my blog is around, is about telling people all the ways that we’ve screwed up. High spending, bad property choices, fancy new cars. We’ve made a lot of mistakes but we tend to learn from them which is cool, as we go.

Scott: So transitioning a little bit here, before we transition to kind of your leaving the job, the workforce, can you talk a little bit about do you have any other investment strategies besides paying off your mortgage and building up your Vanguard and index funds or is that pretty much the bulk of your investment portfolio?

Joel: That is right now the bulk of it. We really are big into tax-sheltered accounts. So 401K, IRAs, HSAs are great. We max those out every year. So we’re really big on maxing all that out. And then currently, the overflow goes into the Vanguard just a normal taxable brokerage. But that’s the bulk. Now that we’ve divested from that rental property, we sold that rental property, so it’s really just our investment portfolios and our paid off house that we have. That’s basically our strategy right now is just having enough saved up to live passively and yeah, that’s the gist of it.

Scott: Awesome. One more question before we get to the transition out of work, you don’t mention very much about your career during this time period. Were you just—did you feel like you were fairly optimized in the income front or were you just not really interested in finding ways to earn more versus spending less?

Joel: Yeah, that’s a great question because the math does work both ways, right? It hits the same if you can double your income, it’s the same effect as cutting your expenses. You really can save a lot either way. The nice thing about focusing on the expenses, one is you kind of get that triple value where every dollar that you reduce on those expenses also reduces what your expenses are going to be in FI, right? Because the main assumption is your spending is the same once you hit FI. And so that can help you lower your lifestyle a little bit so that you can maybe reach FI even sooner.

But the other reason even is, I think you kind of hinted at it. We had pretty decent salaries. There was less room to optimize on the income front than there was on the expenses front. We had so much room for improvement on the expenses side so we just didn’t really focus as much on the income. It’s not to say we weren’t gradually increasing. I did switch jobs in my search for purpose. I thought maybe switching to a different company would bring me more happiness in my life. It was short-term. It did for a few months but it also brought with it a nice 15% salary bump, which was nice.

So I do tell people—because a lot of people tend to stay with their same company for a lot of years in the engineering career, and so if you can jump around every three or four years, it is good for your salary to do so. But if we were at that point where we wanted another big bump in the income side, we would have to probably move somewhere to a city where maybe the incomes were a little higher or take on some additional part-time work or side hustle and that was kind of the problem.

Our jobs, as we increased—in engineering, they have levels. And so as you go up each level in engineering, you get more responsibility, which essentially equates to longer working hours. And so, our work-life balance, as we advanced in these companies got worse and worse and worse. And you can see this. You can see this in ourselves and our health was taking a sacrifice. We weren’t focusing as much time on health and fitness. We didn’t have as much free time to kind of enjoy each other so your stress levels go up, your health levels go down, and so it’s kind of like if I were to try to chase the income side even more, it would have eaten into the little time that I already had.

So I kind of was like, all right, I see a light at the end of the tunnel with the current plan of reducing expenses and assuming the regular cost of living adjustments on the income side. Let’s just get there. Let’s just pedal to the metal and see if we can get there without burning out. It was close. It was to the point where I was super stressed when I did finally pull away from the full-time job.

Mindy: So did your job know about your blog?

Joel: No. No.

Mindy: Did they know about your FI plans?

Joel: No. So that was an interesting thing. Towards the last year I was there, I knew that I wanted to quit but I didn’t exactly know when. I didn’t know when I was going to. Because there’s kind of this thing where you can always stay a little longer, right? So like, well, if I stay until September, I’m going to get my 401K investing, which is worth another like $15,000. So I want to do that. And I was like, well if I stay until October, I’ll get my annual bonus. So that’s good. That’s another $5,000. Well, if I stay until November, I get—and suddenly, if I stay until January, I can max out my, front load my IRAs for the next year.

There’s just this never-ending—that’s what I kind of learned. It just didn’t end. And so I just knew I needed to leave but I didn’t know when I was going to. And so my work situation was getting a little more stressful and my coworkers really didn’t know anything about—they knew that I was kind of a frugal guy but they didn’t know about my blog. They didn’t know—maybe I had one or two friends who were kind of in the loop, maybe on the inside that knew but for the majority of them, they didn’t know.

And so when I finally did leave, the story that I told everybody, which is true, I just told everybody that I needed a break. I didn’t specify how long the break would be. I didn’t specify what I was doing. I didn’t want to say I was going to retire because that sounds weird and a lot of people have a hard time understanding that, for somebody in their early 30s to say that. So what I did was I said I needed a break. And everybody kind of knew I needed a break because I was super stressed out. And that tended—that was the story that I went with and the response that I got from almost everybody was man, I wish I could take a break.

That seemed to be the universal response. And I wanted to say like, you can! You can. But you know, I didn’t want to open up the can of worms. But that was kind of what my story was as I was getting ready to leave, because I needed a break. And I didn’t realize until a few months after I left my job how much residual stress was left over and that followed me home. And that actually stayed in my life months after I quit. It was just wild.

Scott: So can you talk about that? What did your life look like before and after this transition? It hasn’t been that long has it?

Joel: No, so I finally quit in November of 2017, so just a few months ago. Three months and change now. And leading up to the point where I quit, I was very stressed. My wife started to notice it even more than I did and she would say like, you are not a happy person right now. You are not the fun person that I knew. I was on a program that was very behind. It was behind for about a year. Behind schedule, overcost, overbudget and behind schedule. Everything was rushing, right? So it was just continual.

Every day you were rushing, no matter how much work you did or how good that work was, it wasn’t enough because we were behind. So I had tried to move to a different program. I had asked about getting more people on in my program I had to help me. Moving to different programs. And the way that it worked at this particular company is if a ship was going down in terms of program, you had to stay on board with the ship and you had to do everything you could.

And I could have switched to another company but the problem is, I knew that I only needed six months to a year more in my working career. And in the engineering world, you really don’t want to sign on with a whole new company and do a whole new onboarding process when you know you’re going to leave them in six months. It’s kind of frowned upon and because they’re making an investment in you and I kind of live in a smaller town where the companies talk so I didn’t want to get blacklisted forever. I didn’t want to burn any bridges or anything.

So I said okay, I’m just going to fight this out. I’m going to stay in this program. I’m going to do the best I can. But it got to a point where my wife and I, I think it was the end of October and we were going on a walk and I was just complaining and complaining and complaining. It was a Sunday afternoon and she looked at me and she said, you should quit tomorrow. And she just was very specific. She was like, you should put in your two weeks’ notice tomorrow.

And it was so specific out of nowhere because I was just ranting and venting about work and it was just so specific that I looked at her and I said, I need to do this. Because it was almost like the Band-Aid where you just want to rip it off and not make it—it was so surprising and so out of nowhere that she was just so specific and said tomorrow. And I couldn’t play that game anymore. What if this, what if that. I just knew yeah, I need to just do this tomorrow and get it over with and so I did not know I was going to put in my two weeks’ notice until a few hours before I did.

And I didn’t sleep a wink that night. I was just so nervous, just not nervous because I thought like, financially, it was more of just this idea that you’re going to walk away from a very lucrative career. And it was very nerve-wracking but immediately when I put in the two weeks’ notice, this weight just lifted off of my shoulders and it was pretty amazing.

When I finally did leave, they actually convinced me to stay on a little longer to help train up some new people and everything else. They also finally offered to move me to another program and all of the things that I had asked for at the time. Which you have to be willing to call the bluff though. You can’t go in there and threaten to leave without really meaning it. They were like, oh, we can give you a three months’ sabbatical. I looked at him and I said, I need more than three months. I need some time off.

And so when I left, it took a few months for me to realize that the stress from work was still with me. And the story that I gave in the presentation that you guys saw was that I was making the bed, I think, in my guest room on a Tuesday at like 10:00 o’clock in the morning. I had nowhere to be, nothing to do, and I was like stressing myself out, rushing to get this bed made and I’m like, I’m frustrated and I stopped and my heart rate is up and I was like, what am I doing? Why am I rushing to make this bed?

It was like I was behind schedule from work. It was like nothing I could do was fast enough and so that’s when I realized, wow, I need to consciously just decompress and take a few months. I had toyed with the idea of maybe I want to do some part-time work from home or maybe I want to do a ramp down, maybe go to a reduced work week or something in the software engineering. And so my wife kind of made this rule and she was like, no, no work for you for six months. You really need to destress and come down.

Mindy: I like your wife a lot.

Joel: Yeah, I’m kind of glad she like set the rules for me. She’s been hinting now, oh, maybe you want to do something to make a little income on the side and this and that. So my goal is to kind of do fun stuff, stuff that I enjoy and maybe make it profitable, do something that I enjoy. And it’s not necessarily because I need the money. I think it’s more in the sense of I just like to feel like I’m doing something fun and something that brings enjoyment.

My wife and I also tend to disagree on exactly what our FI number is. So, my number, that I’m basing our FI off of is a little bit under $30,000 a year. And hers is a little closer to $35,000. So we disagree. I say, look, we’ve been spending $30,000 these past few years. We’re clearly at $30,000 and she’s like, no. I want to be closer to $40,000 because I want to have this ability to do more. Have a more lavish lifestyle and you know, go out to eat when I want to and this and that.

And I said, well, you already do those things. So we kind of go back and forth. So she enjoys her job though right now. So she’s kind of working that extra year or two. She wants to build the extra cushion on the income side. So I said to her, yeah, if you’re enjoying what you do and you like it, then I mean that’s the ultimate goal, right? To find something that you love and at the same time get paid for it, that’s pretty great.

But I’m also trying to convince her to like, if not quit, then at least reduce her work week and have more time at home because I want to have more fun like with her. Go do more things with her which is part of the fun. So I’m slowly trying to convince her.

Mindy: Well, sure. I have a question. You were a software engineer. Are you Ruby on Rails, by any chance because we need a Ruby on Rails programmer?

Joel: Man, I’ve done a little bit with Ruby. It was not my focus. I was a Java C++ guy but you know, it’s not something that I couldn’t learn pretty easily. I’ve used it. But it was more like collegiate level so like, college projects and stuff like that. But yeah, I could totally be interested in hearing more about this opportunity.

Mindy: Well, we are real estate focused. You’d have to start loving real estate again.

Joel: I don’t not love real estate.

Mindy: Look, we got you a new job.

Scott: That’s awesome. Well, should we move onto our Famous Four here?

Joel: Yeah.

Mindy: The new Famous Four.

Joel: Awesome.

Scott: The BiggerPockets Money Show Famous Four.

Mindy: Yeah. Scott, I have to start this because you want to do number four. So, Joel, what is your favorite finance book?

Joel: So, this book was maybe more than just finance. It covered finance a little bit but for me, the book that changed everything was Your Money or Your Life by Joe Dominguez and Vicki Robin. And the financial specific side of it, maybe, is a little bit out of date today. Although I hear they are going to be releasing a new version of this book that’s updated. But the version that I read was talking about like putting all your money in bonds at 10%. I was like, man, that sounds great. I can do that. Sounds solid.

Mindy: I love 10% bonds.

Joel: That sounds wonderful. But I think overall, the message of that book of equating your money and your hours and your life to like life energy, this kind of idea that you could either be doing your life here, putting your energy in here or putting it into something that is actually meaningful to you and that really opened my eyes quite a bit. And it did have the whole concept right of the big picture concept of you can get to a point where you find what enough is and I think that’s the key to a lot of financial independence discussions. What is your enough?

And it’s different for everybody, for every family, where that enough line is. But that’s the key of finding it. Because you can go way past that enough line, which is what we did, and still not necessarily be happy. Because your life energy is being used on stuff you don’t want to use it on. That book was very meaningful to the wife and I.

Mindy: That was a great book.

Scott: Going right along with that, you mentioned so many mistakes that you’ve made with money over the past couple of years. But what do you think was the single biggest one of those mistakes that you made?

Joel: So it would have to be the house that we bought in 2007, the townhome. I have a blog post about it where I actually run the numbers and see what this—I call it “Adventures in Real Estate”. The adventure ended up costing us, we lost about $150,000 on that adventure. Even with the rental income recouping and even with the sale of the property and everything else. That includes total cost and interest, everything else. It was a $150,000 lesson.

Scott: Does that include the $8,000 you walked away with at closing?

Joel: Yes. Actually. I had to think about it for a minute. I had all the line items on the blog post that shows like everything and yes, yes it does. It was a very expensive—

Scott: We’ll have to link to that post in the Show Notes here.

Mindy: Yes. But as a real estate enthusiast I would like to point out that this was at least in large part due to the timing.

Joel: Yeah, we had perfectly wrong timing.

Mindy: Nobody in 2007 had—

Joel: It could be the textbook case, right? Because you can’t make it any worse if you tried.

Mindy: And note, in 2007, it was like, I know next year is going to suck so I’m going to buy a ton of real estate right now. Like, it just kept going up and before that, real estate didn’t go down.

Joel: Yeah, that was the popular opinion is that it’s going to keep going. I should have researched but yeah.

Mindy: And but, if you would have researched it, you would have seen that yes, there’s pockets of the country where real estate goes down but for the most part, real estate does go up and always goes up and at worst, it flattens off. So to have, to do all of this research, you would have bought the house anyway.

Joel: Yeah. No, it was wild. It certainly was a rollercoaster.

Scott: But in spite of that, you are sitting here ten years later, retired.

Joel: Yes. That’s true.

Scott: Taking a break or whatever you want to call it. You’re here. You made it in spite of that. That is phenomenal and it should be a bit of hope and inspiration for people that are trying to repeat that, even in the worst possible start. You can do this.

Joel: Yeah, and a lot of people say, well, you know, do you think it was—and I get this a lot, do you think it was the fact that you were both engineers that allowed you to accomplish this, you know? I said well no, my household income never went above maybe $180,000 total. That was with the rental income coming in. So if somebody were to do this in half the speed, if somebody were to do this with just one person working, they could potentially do the same thing maybe in the eight to ten year timeframe instead of the five year timeframe. But it’s still doable, even with these mistakes, it really is.

I had a coworker that said, you guys can do this because you’re making so much money. I said, well look at xyz, and I pointed to other coworkers that both had two spouses working and I said, how come they’re not doing it? You can spend the money just as easily at any stage of income. You can spend all your money. And it just gets easier.

Luckily, we weren’t actually in that—once you get to the $250,000-$300,000, $400,000 household income spot because then your friends and peers are buying boats and they’re buying golf club memberships and they’re buying second houses, right? Your summer house and your winter house. There’s always something that can eat your money if you don’t save it so I think it works across the whole spectrum. The savings rate, it just doesn’t lie.

Mindy: That’s a great quote. There’s always something that can eat your money. Okay, so what is your best piece of advice for people who are just starting out, just discovered the concept of FI, just discovered you know, just started working? What’s your best piece of advice?

Joel: Don’t get overwhelmed. It’s a lot of stuff to take in and it can feel like you are really far away from the finish line. But what my wife and I did, we worked together as a team. We kind of made it a game and we just broke it down into small, actionable pieces. One thing a month that we could improve. Sometimes, we’d feel really aggressive and we’d say, let’s do one thing every week and we’d find another thing to improve.

But we broke it down into small pieces and I think that’s the key because when you look at it as a whole, how do I get from here to there? It’s really overwhelming. And a lot of people that hear our story say, well, wow. It sounds like you guys just turned it around overnight. And I mean, yeah. Five years is a quick turnaround time but it’s still gradual. It still took us a year to learn how to cook. It still took us two years to get our savings rate even close to being above that 50% mark and so this was gradual. This was not something that happened overnight.

And you kind of build this momentum with you as you go. So I would say, my best piece of advice would probably be take your time. It doesn’t have to be overnight. Don’t get overwhelmed and just start making small changes because they all add up. And that’s the key here. Everything adds up. Every little expense adds towards your goal.

Scott: One thing I’ll throw in here is this story that you’ve been telling this whole time, you tracked the numbers. You went back and did all the numbers and there’s actually three graphs, which I’d love to link to in the Show Notes, in addition to it, if you have a blog post on it. But you showed your spending going over from $100,000 to $80,000 to $60,000 to $30,000.

And then there’s a corresponding graph that shows the increase in net worth as that savings level declines and then there’s a third graph that shows your expenses, your investment income, and your target that you’re trying to hit with your investment income. So you just watch these three graphs kind of merge together, fitting what you’ve just kind of described. It’s kind of a really cool way to look at things.

Joel: Yeah, it’s very revealing watching the expenses just kind of slopes down at like this 45 degree angle and then you see the asset value do the same thing in the reverse. I mean, it’s striking. It does speak for itself. The charts, I think I first showed them in the presentation that I gave at camp where I met you guys, I just published those charts for the first time actually, over on the Get Rich Slowly Blog, over on JD’s blog. He had me on as a guest post and so those charts are there, actually, right now. I haven’t actually put them on my own blog yet.

Scott: Awesome. We’ll have to link to wherever they’re available.

Joel: Hot off the presses.

Mindy: Yeah, we’ll link over there. One of the things before Scott gets to his next question—we met Joel at Camp-a-FI and he gave this amazing presentation and he had this line that really stuck out—What is the worst that could happen if you quit your job?

Joel: Yeah, so the way I always tell people is that my worst case scenario is everybody else’s every day scenario. Right? So going back to work. That’s like the end of the world. Oh no, sequence of return risk. Or oh no, a big market downturn. Oh no, it turns out we actually spend $40,000 a year instead of $30,000. That’s our real number. My worst case scenario is everybody else’s every day scenario, which is going back to work. And that kind of ties perfectly to the other kind of mantra that I’ve been living by lately, which is when you are close to financial independence, every job is a high-paying job because you’ve always got that giant fraction of your lifestyle covered and so everything else is like this gravy.

So I could do something fun if I go back to work, something low-paying, something low-stress, as well. I joke about being like a boat driver at Disneyworld or I could be—I could make coffee at a local coffee shop, even if it’s closer to minimum wage, it’s still gravy. I can still max out a 401K with it. It means, it’s still a high-paying “job”. And so, if I ever do go back into full-time—I will never go back to full-time.

If I ever go back to work, it would be something fun, something that I enjoyed, where I could work with people that I enjoy and you know, the money wouldn’t necessarily be the deciding factor. But yeah, that’s the worst case scenario, which you shouldn’t worry people so much.

Because I know some people want that—they want that 100% percent certainty. I want—the Four Percent Rule is too conservative. I need Three Percent Rule. I want 100% or 99% success. Well, maybe you’re working too many years. That’s the reverse end of that risk. Maybe you work two or three more years than you needed to and that’s scarier to me, given what it was doing to my health and sanity.

Scott: I’m very close to 100% certain that in the event of a market downturn, you’re better off than your colleagues who have very little wealth.

Joel: Yes. It’s a whole playing field level. It goes down equally.

Scott: So I have one more Final Four question here for you which is, what is your favorite joke to tell at parties?

Joel: So, Scott, you and I have very similar senses of humor and so—

Mindy: Hold on, I want to turn off my microphone.

Joel: I think you will enjoy these. Mindy, I’m sorry in advance. So, this is one of my favorites. Did you hear that Wal-Mart is giving away all of their dead batteries?

Scott: No.

Joel: Yeah, they’re free of charge.

Scott: That’s a very positive joke. I like it.

Mindy: All day, every day.

Joel: I’ve got a bonus one, Scott. For you. What’s the best possible gift that you can receive?

Scott: I don’t know. What is it?

Joel: It’s a broken drum. You just can’t beat it.

Scott: I love it.

Joel: These are bad. My wife hates these jokes. I always knew these jokes—Mindy, I think you called them dad jokes?

Mindy: They’re dad jokes.

Joel: I always knew them as—my friend growing up, when we were teenagers, he had a stepdad named Bill, and Bill would always say these jokes and we called them Bill jokes and so that’s how we know them. They’re Bill jokes. I think they’re great but nobody can stand them but me. And Scott, too.

Scott: What has eight eyes, eight legs, and eight arms?

Joel: I don’t know. What?

Scott: Eight pirates. I just heard that one at the BP Meetup we had last week. Someone came and visited and was like I got to tell you a joke. Here it is. I was like, yes, I’m telling that on the next podcast, so there it is.

Mindy: Do you remember who told you the joke, Scott?

Scott: No, I’ll have to go and look through my notes to remember but—

Mindy: I wanted to give them credit.

Scott: I’m sorry, I’m not giving whomever credit for this great joke.

Mindy: Okay. Moving on. Joel, where can people find out more about you?

Joel: So I blog over on Financial 180, is the name of the blog. The website is FI180.com so the numbers 180. I also have a Facebook that you can link to from there. I have a Twitter. And yeah, I try to keep in touch with people and there’s a contact e-mail on there. I really do read a lot of my e-mails that readers send in and everything and I enjoy the community aspect of the blog a lot. And so, I encourage everybody, yeah. Ask me questions.

Shoot me e-mail with some of your sample scenarios with like your lifestyle and I can help with ideas of how to improve things, how to shave costs. How to shake up your lifestyle around it to improve things. So I really enjoy the reader interactions. So I encourage everybody to come check out the blog and hear more about all the horrible mistakes that we made along the way so that you can avoid them yourselves.

Scott: Awesome.

Mindy: Awesome. Well, thank you so much for your time, for taking time out of your apparently not busy day now that you’re unemployed to talk to us. I really appreciate it. I love your story. I love that line. I just—I can’t say it enough. Your worst case scenario is everybody else’s every single day. So if this is an option, if somebody is interested in financial independence, go for it. Because what’s the worst that can happen, you get a job? You already have a job.

Joel: It really should inspire people to kind of be bold, go for what they want to do, and it’s really not anything to be afraid of. I know that there’s a lot of fear around financial independence, particularly lately with a lot of talk of sequence of return risk and a lot of talk of doing something wrong. Mistakes happen. I make them all. I’ll blog about them. I’ll probably continue to make more. But you get through them and you just keep going and that’s part of the journey. That’s part of the fun.

Scott: I love it. This was—I love everything about what you’ve done and how you’ve talked about it and what you’re going to do. Thank you so much. This was awesome.

Joel: Thank you guys. It was a pleasure getting on here and getting to chat with you.

Mindy: Okay, well, we don’t want to keep you from your very busy day of doing—making the bed?

Joel: I do have hobbies, right? I write music in my downtime. I do write and play music. I write. I’ve got some ambitious goals for books down the way that I want to write. So I’m having fun. I’m not just sitting around. I think the joke from camp is that, I’m not just sitting around in my underwear playing video games. I am not doing that.

Scott: Did you wear pants today?

Joel: Yes. I’m wearing pants right now. And maybe—

Scott: I shouldn’t have asked.

Joel: Maybe that period of video games in the underwear was a week or two, max. That was maximum.

Mindy: That’s important to have.

Joel: I think it is, actually. To just have no care and I think it can help recalibrate you to take on some new work ethic.

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

Scott: Let’s get out of here.

Mindy: Okay Joel, thank you so much.

Joel: Thank you guys.

Scott: So that was Joel from FI180. Again, I was so excited going into it and it lived up to all the expectations I had in my mind. He covered every base of personal finance, income, spending, investing, and the transition out of paying work into the life that he is designing. There’s a lot of talk and mentality behind that. I thought it was a fantastic show. What’d you think, Mindy?

Mindy: I loved that show. I love Joel’s statement. I know I keep saying this over and over but I loved it. What’s the worst thing that could happen? You have to go back to work. Your worst case scenario is everybody else’s every day life. So yeah. If you’re thinking about joining the FI community, if you’re thinking about going down this path, start. Start today. Start tomorrow. Don’t start tomorrow. Start today.

Scott: Yeah, and if you listeners are interested in any of the references that we cited, please be sure to check out the Show Notes. You can find them on BiggerPockets.com and search for this BiggerPockets Money Show, Show Number 11.

Mindy: The quick link is BiggerPockets.com/MoneyShow11.

Scott: Ah, that’s what I was looking for. Yes. Thank you, Mindy. So there’s some great resources there. I definitely would encourage you to check out that link that’s going to be on JD Roth’s site with those graphs, just showing what mathematically happened as a result of the story that Joel just told us. Definitely go check that out.

And then I think for us, our homework next is going to be, can we find a similar story to Joel but with someone that was married and had kids at the same time? Joel did this with a two-income, no kids household. Can we find someone that’s done a similar approach and similar successes, maybe similar turnaround that has already had the kids? That would be an awesome guest. If you know anybody like that, please invite them to apply to be a guest on the show. We’d love to hear from them.

Mindy: Yes, and if you have questions about this particular episode of any other episodes, you can go into the forums. There is a special BiggerPockets Money podcast forum where you can discuss each individual episode. So we’d love it if you could check us out over there, too. BiggerPockets.com/forums.

Scott: Awesome. And then we are still a new show so we would really, really appreciate any ratings or reviews on iTunes or anywhere else that you are listening to this podcast. Those mean a lot and we really do read them all. So we appreciate every single review.

Mindy: Yes. Thank you. Scott, shall we head out of here so we can not play video games?

Scott: Let’s head out of here. This has been a long show. So I thought it was a great one, though.

Mindy: Yeah, it was a long show and thank you for sticking with us. So from Episode 11 of the BiggerPockets Money Show, this is Mindy Jensen, over and out.

 

 

Watch the Podcast Here

Help Us Out!

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds. Thanks! We really appreciate it!

Podcast Sponsor

Wunder CapitalI’m sure many of you have seen explosive growth in residential solar installations. Similar to residential, small and medium sized businesses want to go solar. However, financing for commercial solar isn’t available to businesses unless they have investment grade credit.

Today’s sponsor, Wunder Capital, is helping to solve that problem by financing solar for SMBs. Learn how you can begin earning up to 11% returns at wundercapital.com/bp.

In This Episode We Cover:

  • What Joel’s life was like before he focused on financial freedom
  • Having an expensive lifestyle as the norm
  • The logic behind high expenditures
  • Why the 180-degree shift to financial independence?
  • The first steps they took
  • The value of cooking good food
  • Cutting out unnecessary expenses while optimizing needs
  • Buying the worst mortgage property
  • Their crazy real estate investment experience
  • The tenant from hell
  • What they did to increase income
  • How Joel finally decided to quit his job
  • Their FI number
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Things get stressful when you have an unsustainable lifestyle.” (Tweet This!)
  • “The key to financial independence is to know what is your ‘enough’.” (Tweet This!)
  • “Money shouldn’t be the only deciding factor when deciding for a job.” (Tweet This!)
  • “Your worst case scenario is everybody else’s everyday life.” (Tweet This!)

Connect with Joel

About Author

The BiggerPockets Money Podcast is for anyone who has money… or want to have more! Join BiggerPockets Community Manager Mindy Jensen and Director of Operations Scott Trench weekly for the BiggerPockets Money Podcast!
Each week, financial experts Mindy and Scott interview unique and powerful thought leaders about how to earn more, keep more, spend smarter, and grow your wealth.
You’ll get tips for getting your financial house in order and actionable advice from guests who have been in your shoes – and found their way out.

4 Comments

  1. David Brown

    Hey, great podcast, again! Thanks for bringing us some inspiration! Hey Scott, if I recall his name correctly, it was Dan, who told you that joke at the meetup. Unfortunately I didn’t catch his last name. He told me the joke just before he went to talk with you. Sorry Mindy, I think these jokes are great! Cheers

  2. Keri Middaugh

    I am really enjoying these new podcasts and I look forward to them every Monday (my favorite day of the week – no lie)! I especially like your idea of hearing from a family who has achieved FI. Kids are a big part of family life, and they affect everything from time to finances to type of house situation.

    Keep up the good work!!

    Keri

  3. Daniel Showman

    Interesting, I usually focus on the more income side of the equation, but maybe I need to focus more on the cutting spending and increasing savings side too. It definitely has inspired me to look more into that side of the FI equation. Thanks for the great information.

  4. Jim Hiler

    Great podcast. Listening to these money podcasts really forces you to challenge your way of thinking.

    I plan to start focusing on increasing our savings rate. My question is about the index fund investing Joel mentioned. Should I be investing my emergency fund and my investment savings in index funds until I deploy that capital elsewhere? From the few articles I skimmed it seems that they are relatively liquid…i.e your cash can be withdrawn in a couple days.

    Is Joel living solely off the dividends from his index investments?

    I was always adverse to the stock market because I know next to nothing about it and don’t follow it. The only stocks I hold are in my 401K because that’s the only real choice.

    Any tips?

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here