BiggerPockets Money Podcast 15: The Pillars of FI, Pt. 2: Designing the Life You Want with Brad Barrett and Jonathan Mendonsa from Choose FI

by | BiggerPockets.com

This is the last half of the epic interview with Brad and Jonathan from Choose FI.

Continuing where we left off from last week, we finish up the Pillars of FI conversation, including beginner level topics you can be doing such as frugality and index fund investing but also touch on more advanced topics like tax optimization and travel hacking.

If you have not yet listened to part one, you can find that here

This episode – along with last week’s part one – is a must-listen for anyone on the path to FI, or just getting started.

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

 Scott: This is BiggerPockets Money. Show 14. Part two. 

Brad: It’s that little extra bit of intentionality, and setting priorities. Okay, that saves me $80 a month, and compounded over decades that’s a boatload of money.

 

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

 

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

 

Mindy: Scott, I am doing fantastic. I am out in the Pacific Northwest with my family on vacation. My husband is going to be running a marathon this weekend. We came out here for the girls’ spring break. The Pacific Northwest is so much different than the Denver area. It’s so green. Everything here is so green. Of course every time I walk outside, it’s raining. That’s probably leading to the greenery.

 

Enough about me. Let’s get on into today’s show. We have the second part, the wrap-up episode of the BiggerPockets Money interview with Choose FI. Brad and Jonathan are here to continue with their pillars of financial independence. The 10 foundational points of what it really takes to get to financial independence.

 

Scott: Yep. Again, this is the second part of that episode. You could pick it up right here and get some great information, or what we recommend is go back and listen to last week’s episode before you get into this one, so that you can know what we’re talking about in the rest of the today’s episode.

 

Mindy: Yes. Shall we bring them in?

 

Scott: Yes. Let’s them in. First, let’s hear a quick word from today’s sponsor.

 

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Scott: Alright. Thank you for today sponsor. Mindy, should we bring them in?

 

Mindy: Without further ado, here is part two of the Choose FI interview with Brad and Jonathan.

 

Scott: Alright. The next pillar of FI here that we want to talk about is college hacking, which I’m sure is relevant to some listeners but may be well past it for others. What’s your advice on college hacking?

 

Jonathan: I created this pillar knowing that I didn’t have a great answer for it and it frustrated me. All of this comes down to opportunity cost. At what point are you starting back at zero? So many of us are starting at negative 40,000, negative 60,000. Forget the car payment. That’s nothing compared to this mortgage that some of us are carrying around our backs.

 

I got back to broke at 32 years old. That was when I got back to broke for the first time. Now I’m starting from scratch. What does it look like for an individual that’s starting from scratch at 18? Finally, they graduate high school. They graduate college. They go right in that job, but they don’t do it with a burden of $40,000 in student loan debt. It needed someone to constantly highlight it, and go back to it, and add additional tools to the box.

 

There’s a few things that Brad and I uncovered, not because it’s our ideas, but rather people in our community of brought it together and other people have documented it. This is something that all of us have an obligation to constantly research, constantly find more and more ideas. Honestly, get them out there so that more people can take advantage of them. More than anything that I can think of, a signal of our broken system is how bad the student loan situation is for students coming out of school.

 

Brad: For me, as far as college hacking goes, again, it goes back to thinking a little bit differently. I know when I was looking to go to college back in the day, I looked at the most elite schools I could get into. I was fortunate to get accepted to two of the top 10 colleges in America. They’re expensive. What I realized looking back is that, if I was, “smart enough” or whatever you want to call it, to get into those schools, I probably could have gotten a full merit scholarship at 90% of the other schools in the country, but I was too stupid to realize it.

 

Even though I didn’t go to one of those two schools, I actually went to a school, I did get a partial scholarship. It was still a great school. Please, no tears for me or anything. My parents still paid a significant amount of money for that answer. I didn’t come out with student loans, but if I had gone to a school that I could have gotten a scholarship to, maybe some of that money would have came to me. At 22, I would have had a net worth of positive, tens of thousands. I think just something as simple as that. Now obviously, that’s not for everybody.

 

There are examples, like here in Virginia. There is a program that if you go to a community college, now this is not going to be “societally palatable,” let’s say, for most people, for upper-middle-class. It’s like, ‘Oh, can you imagine? My kid’s going to community college.’ Most people aren’t going to want to say that, but that’s ridiculous. That’s not how people in the FI community thing. We think smarter. We think in a more optimized manner.

 

The way that this works is, you go to community college for two years in Virginia. You get a three, four, and you check a couple boxes, dot all the i’s, cross all the t’s. You get automatic acceptance to the University of Virginia, or William and Mary. Those are the two of the best schools in America. You only have to pay for those for two years. Right, [inaudible][00:05:55]. Nobody knows about this. Nobody does it.

 

Scott: That’s fantastic.

 

Brad: You pay for UVA for two years, you get the same degree as everybody else who paid for four just by being a little bit smarter. You take a ton of AP tests and club tests in high school. See what you can do to get as many credits as you possibly can, so you can shave off a year.

 

There are all these strategies. You just need to think about them. Think a little bit differently than the next guy. Mindy, you have your list in FI. That’s my mental list. My ten in FI is, think a little bit differently than the next guy.

 

Mindy: I want to add on to this. Make smart decisions about college. I started college before I graduated high school, which is a smart decision. My college degree is in fashion design, which is possibly the stupidest thing you could possibly study. Nobody gets a job as the next Karl Lagerfeld, the next Stella McCartney because they went to fashion design school. I know how to sew. I can make you anything, but that’s literally the dumbest thing I could have studied. If I would have studied business, that would have been a much smarter decision. I would have been able to get better-paying jobs right out of the gate.

 

My parents made extremely smart decisions about how to pay for my college. When I was a kid, my dad would go and buy a $50 savings bond for me and for my sister every paycheck. Then he would just stick in the drawer because savings bonds don’t mature forever. Once they matured, I was in second grade. I remember sitting there signing my name a thousand times. I’m like, ‘This is awful. I hate this.’

 

My parents are like, ‘You have to do this,’ because it’s in my name. They took advantage of the unbelievably, ridiculous interest rates in the 80s. They locked that into a 10 year CD at something like 14%. That’s unheard of now. Yes, This, I don’t know, $3,000 or $5,000 that he spent these savings bonds turned into my college fund, my sister’s college fund, a large portion of my brother’s college fund just because of making intentional decisions, and taking advantage of the opportunities that they had available. 14% interest. That never happens ever. That’s never going to happen again. Then I went and spent it wisely on fashion design.

 

Make smart decisions about college. If you’re not sure, if you have a passion you want to be a teacher, great. Go be a teacher, but if you’re not sure what you want to do, study general education courses at your local community college. Go and study business. You’re never going to do a bad thing by studying business.

 

Scott: I think that’s great. I think that if you go and choose a profession that is not going to be high paying or doesn’t have high odds of success in the marketplace for that starting salary, just do it exactly as you guys just said. Be smart. Find a way to fund college without having that debt. The worst thing you can do is come out of college with a history degree and a hundred grand in debt. That’s not going to help in your quest in life in general. Even if you don’t care about FI, that’s going to be such a devastating start to tackle in real life.

 

Mindy: The private colleges cost exponentially more than the state colleges. You’re not getting, in many cases – I should not talk smack about all private colleges and lump them together, but in many cases you’re not getting any better of a degree. You’re not getting any better of an experience. You’re just getting more debt.

 

Scott: This is a BiggerPockets. I’ll plug Brandon Turner’s college hack. He put a 25% down on a $400,000 or something like that, quadplex. He put a 15 year note on it. It cash flows about even, maybe a couple hundred bucks a month. By the time his daughter is college age, he’ll have an entirely paid off piece of property which he can either sell to pay for college. He can use the cash flow to help offset some of the college expense, or, and this is my favorite option, he can re-finance to another 15 year note, pay for college for his daughter and then use it for the third generation. I thought that was a pretty fun one.

 

Jonathon: Love it. Love it. So many jewels to choose from.

 

Scott: Should we move on to the next pillar here?

 

Jonathan: Yeah. Number eight is cut the cord. We tie this now together with the cell phones and the cable package. It really goes back to tracking your spending. I think one of the things you’re going to find very quickly is, after you go through the obvious things like the car, your cost of shelter, and then your food, and then your car bill, so all your transportation cost, right behind that is now is this bloated piece of the pie chart, that includes what you’re paying to watch TV, and this phone that you have on your hip.

 

It is just astonishing that, as a culture we have decided that $250 a month is okay to pay any single company for something that our parents didn’t even know you needed. At one point, I was paying Verizon $250 bucks a month for my cell phone and cable package, and I still didn’t have the game on Thursday night because it wasn’t [inaudible][00:10:53]. How much more money do I have to send them before they give me everything? There is no dollar amount that would get you there.

 

What you find if you’re willing to just do what we talked about earlier with the coffee, cut it out. Then figure out what you need to add back. You’re not going to miss the cable. I promise you. I promise you, you will not miss it. We get rid of the cable and then you find al a carte options to fill in the gaps if you miss something.

 

Mindy: I did a little bit of research on this because I was writing an article called, 12 Reasons You’re Poor. I knew TV made you poor, but I wasn’t sure of all the stats. The average American watches five hours of TV every single day. That’s unfathomable to me, because there’s not five hours worth of TV to watch every day. I can’t imagine what people are watching.

 

Maybe they’re watching the news, but they’re probably not. If you’re watching five hours of TV a day it’s not because you want to learn, it’s because you want to veg out and watch dumb things. Can you imagine all of the things you can accomplish or learn in five hours if you turned off the TV, read a book, did some research, or did something?

 

Scott, do you research your real estate purchases, or do you just see something and be, ‘Yeah, I’m totally going to buy that?’

 

Scott: Yeah, I spend a little time sometimes. Look at the market.

 

Mindy: Look at your net worth at your age, compared to similar people your age and their net worth. You have a positive net worth. So many kids your age don’t even have that. I’m sorry. I call him a kid. I’m a couple of years older than Scott.

 

Scott: I’ll just say that the game is on, on Thursday night at Buffalo Wild Wings. They have a 60-cent wing special. Six bucks. Get plenty of wings. Game.

 

Jonathan: Nice. That’s very cool.

 

Scott: Throw a beer in there if you’re feeling aggressive. Much cheaper than 250 bucks a month.

 

Brad: Yeah. This one, cut the cord, it doesn’t sound like something that would rise to the level of a pillar of FI. I think it’s more find your priorities. I think that is probably how I would look at this generally. I think because the dollar figures are so significant on cable and cell phones, we do call it cutting the cord, or cutting phone. You need to prioritize things in life. You cannot spend like everybody else, on every single thing with that wild abandon and expect to reach financial independence.

 

That doesn’t mean you have to live a life of deprivation. There’s a crucial distinction there. You just need to figure out what makes sense for your life. For me, on my cell phone I didn’t want to pay $100 a month for unlimited data. There was no value for me because I’m at home with Wi-Fi. I work from home. I’m here most of the time, the vast majority of the time. I didn’t want to pay for data and I had Wi-Fi. I went to Republic Wireless and found a plan that had unlimited talk, text and wifi. It was just basically pay as you go on data.

 

My cell phone bill, instead of being $100 for unlimited data or whatever it costs these days, mine is usually between $12 and $16 a month. If I have a big month of data it’s $16. That’s what we’re talking here. It’s just by being intentional. It’s not saying, ‘Okay, what do I have to give up for that?’ What I have to give up is, I’m not streaming YouTube or Netflix when I’m not here at home. If I’m out and I know that’s going to cost a lot of data, I’m just not going to do it.

 

Oh poor me. Cry me a river. I can’t watch Netflix when I’m in the car, or waiting for a doctor’s appointment. I can listen to a podcast because I’ve already downloaded that. It’s just a little extra bit of intentionality and setting priorities. Okay. That saves me $80 a month and compounded over decades, that’s a boatload of money.

 

Mindy: Does your life suck because that?

 

Brad: Yes. My life, it’s horrible and irredeemable.

 

Mindy: Horrible. Yeah. Horrible. Do you have formal employment right now, Brad?

 

Brad: Formal employment, no. I was a CPA in my former life. I left that job a little more than three years ago. It’s like 37 months as we’re recording this. Yeah, I basically left to work full-time on my websites, which at the time were just TravelMiles101 and RichmondSavers.com, which basically talk about the travel rewards stuff we talked about earlier. Then Choose IF came about a year ago, and it’s really the project of my life. It’s the most exciting thing I’ve ever had going. I spend the vast majority of my time on Choose IF now.

 

Mindy: This sounds like it started off as a side hustle. I know it started off as a side hustle because that’s how I met you. It was with your side hustle with Richmond Savers. Now your full time job is what used to be your side hustle.

 

Conveniently enough, that’s number nine. Side hustles. Let’s talk about side hustles, what that is like. I said earlier, you’re never going to get to FI just by working your $50,000 a year job and saving 10%. That’s not going to get you there.

 

Brad: Yeah. I agree. While I have an interesting side hustle story, I think Jonathan’s frankly, is more interesting just because of the immediacy of it, and just how stark it is. Jonathan, if you want to go.

 

Jonathan: Yeah. I was thinking about setting that up as a mental frame. We go back to this idea of what are the levers that you’re going to pull to reach financial independence. There’s the income side of the equation. There’s the expense side of the equation. We spent a lot of time talking about how to crush your expenses. With your incomes, you can find a very high paying W-2 employee job. It’s certainly a way of doing it. You can start finding a side hustle.

We just talked about how the average American is spending five hours a day of their life watching TV. What happens when you give that up, and you say, ‘Wow, that five hours I was being entertained. Now, I’m going to find a way to be entertained creating a side hustle.’ That’s a powerful place to position yourself mentally. That’s basically where I landed.

 

At the age of 32 years old, I had finally just paid off my student loads. I had a $168,000 in student loan debt. Paid them off at the age of 32. Basically back to broke. I had a little bit. I had a positive net worth, but that was officially when my student loans were crushed. I was inspired to start this side hustle, Choose FI with Brad. I was working it at the same time, while I was working as a pharmacist.

 

32 years old. No student loan debt. I had been maxing out my 401k. I’m on this path. I have a fairly significant savings rate because the same reason I was able to pay down $168,000 in student loan debt. Now that that debt’s not there anymore, that obviously goes straight into savings and investment.

 

I met Brad and we decided to create Choose FI. It was just a side hustle that I was doing literally when I got home from work, for about the first six to eight months. It’s slowly taking up more and more of my time. It goes from five hours a day, to six or seven to eight hours a day.

 

At some point in time, they were probably both taking up equal amounts of time. I found myself very quickly in this unique situation where my entertainment, the thing that I got the most joy from, this side hustle was now actually just paying enough to cover the bills. It was growing. I didn’t have any debt, because my lifestyle was funded.

 

I got into this situation where I needed to take an extended period of time off to go visit my wife’s family. We had a conference. We were going to ThinkCon, Scott, where I actually met you for the first time. I went to my boss and I said, ‘Hey, look. I got a lot going on. A lot on my plate.’ I said, ‘Can I take like a three week unpaid leave of absence?’ I’m in a pharmacy. I figured I had to have a plan in place and someone to cover my shifts.

 

He said, ‘No, I don’t think that would be in the best interest of the company.’ Well, because of everything else that we’ve talked about up to this point, in October of 2017 when he said that, I told my wife what his response was and she got the holy rage. She knows that I have done a good job. I put my time in. Good employee. How dare he not recognize how awesome I was?

 

She said, ‘I think you should just put your two weeks in.’ Now, I’ve been pleading for this. This is what I wanted. I just needed an excuse. That’s how excited I was. I had something that’s a business. It’s a start up. It’s my passion and it’s also paying the bills. If I can put more into this, more time into this, that would be the best thing ever.

 

In a heartbeat, I went back to my boss and I said, ‘Look, I understand where you’re coming from, so I think I’m going to have to leave.’ Literally, think about the opportunity cost of my last 12 years of my life, from 18 to 32, back to broke. Ultimately, it’s not about how much money you make, it’s about your time.

 

That’s the most precious resource that you have, is your time and what are you doing with it? If the answer is, ‘I’m catching up on the latest season of Grey’s Anatomy,’ you have made a poor decision. Your 10-year future self is not going to be excited about the place that you land.

 

Scott: I got a question about this side hustle. That’s an amazing story. You crushed it. You were able to make that transition. That was a bold move and all that. Getting started with your side hustle, and getting to that point where it started to generate enough to cover your expenses, how was your mindset going into that in terms of risk? Was this a risky choice that you made to start this side hustle in the first place? We know it’s risky to leave and pursue it full time, but was it risky to start it? Was it risky to grow it?

 

Jonathan: Well, those are two different decisions. Think about that. Just separate that objectively out. There is zero risk to partnering with Brad, and in my living room, putting my voice to a podcast, and put it out there and hoping that someone other than my mom will listen to it for an extended period of time. That is no risk. Frankly at that point, it’s no time. You’re just taking the time that you were spending in front of the television, and say, ‘Huh, why don’t I try this?’

 

Sure, at some point it looks like a business model, but it could just literally be you learning how to build a website. It could literally be you listening to one webinar on how to get involved in real estate. It could be you literally just listening to webinar on a hundred different side hustles that other people have done, to find something that appeals to your unique characteristics and interests. Those are two different things.

 

People reject the word “side hustle” and say it’s a very millennial term, and has all these other connotations to it. That’s why I embrace it. It’s literally something you’re doing on the side. In the context of a nine to five, safe, secured job, and if it at some point in time, the stars align, and everything works out, and you can actually start to see how you can monetize that and turn it into a business, where it’s actually feeding your family and paying your bills, that’s the best possible case scenario, but it’s not necessary.

 

Everything up to that point is an exploratory mission where you’ve taken the time that you’re wasting in front of the television and actually put into investing in yourself.

 

Brad: Yeah. I think Jonathan is the perfect case in point of there being no downside risk at all. It’s just learning a set of skills. We talk about the talent stock on our podcast. It’s from a book called, How To Fail At Almost Everything And Still Win Big, by Scott Adams. It’s a brilliant book. I just love this concept, which is, when you start accumulating these skills, you just become a much more valuable person. You don’t need to be world class at any single one of them, but when you have these totally disparate set of skills, you just become much more valuable.

 

In Jonathan’s case, Jonathan is now a essentially world class podcast editor, and knows everything about podcasting to the point where companies have actually come to him, and ask him if he wants to consult for them. How freaking cool is that? That’s just one little side thing. He knows how to create websites. This was a pharmacist 15 months ago. Keep that in mind.

 

Now, he is an expert at dozens of things, so virtually everything you see on Choose FI or hear on Choose FI is because of the skills that Jonathan learned in the last 15 months. That is truly remarkable, my opinion. It cost virtually nothing. Maybe a couple thousand dollars at most, just because Jonathan likes his gadgets and buys top tier equipment. Sorry, but I had to do it.

 

Jonathan: Think about this. Now you’ve moved it from being just a hobby or something that you were doing on the side, that you were paying for post tax dollars, when you’re able to find a business that’s so aligned with something that you enjoy, that’s yet another win that I could spend hours talking about.

 

Scott: What I think is so great about this is, I asked you that question about risk intentionally because it’s not risky. My side hustles- it was not risky for me to try to spend a year and write a book. That was something that I did because I loved it, and enjoyed it. It was a few hundred bucks to do it, and a bunch of hours of time. When I’m getting my agent’s license, I think it was 168 hours of training, a few thousand bucks to get it. It’s not a risk. That’s not a risk like an investment is or whatever.

 

In my position, I would have been foolish to depend on those side hustles to help me build my financial foundation. It’s also risky not to do this on a regular basis and try your hand at some things that you’re interested in, and learning about. I think you should try it probably like one a year, at minimum if you’re serious about financial dependency. You never know. You could get lucky and it cost you nothing. You just learn more, and probably have a good time doing it.

 

You’re going to look back in five, 10 years be like, ‘I’m sure glad I started that Choose FI side hustle, rather than watching Grey’s Anatomy,’ or whatever it was, just like you said.

 

Mindy: Like you guys have all said, it doesn’t have to cost a lot of money, and it can lead to a whole new bit of employment. We started our blog as just a thing. We didn’t even know you can make money blogging. We’re just going to do this so we can keep track of our journey, and then all of a sudden we figure out, ‘Oh, you can actually make money doing this,’ and that actually led to this job at BiggerPockets. I met Brandon and Josh at ThinkCon 13, I think, and started talking to them. It just snowballed from there.

 

I think it was $8 a month it cost, to have this side hustle. There’s so many people who want to start their own business. I don’t want to work for the man. I want to do it myself. You don’t have to quit your job to start your side hustle. Figure out what it is you like, and start small, and scale up as you find that it is beneficial, and valuable, if it pays you. Use your time to discover. Nobody wants this product or service. You didn’t give up everything to go after this one thing that turn out to be a flop. Not every idea is a great one.

 

Scott: Love it. Let’s move on to the last pillar of FI, which is savings rate and the 4% rule. Brad, do you want to give us an overview of what this one is?

 

Brad: Sure. Yeah. Absolutely. The 4% rule is roughly where people start as far as, what’s your number. You see online financial retirement calculators, and they’re usually predicated on what your income is currently. That always struck me as something just odd. There’s something wrong about that.

 

Almost by definition, if you’re living at a current income and you’re saving money, you’re paying taxes like we talked about before, where potentially you can lower that dramatically, that has nothing to do with your needs in retirement. What really where it drives off of, and what people in the FI community think is, it drives off of your expenses.

 

Basically what the 4% rule states is, you can take approximately 4% out of your total buckets. For most people it’s your retirement income, let’s just say your net worth generally. You can pull that out. Let’s say you have $40,000 of expenses. If you had $1,000,000 in net worth, you could pull 4% of that, which coincidentally is 40,000. That money should in theory last in perpetuity.

 

Then there’s certainly some argument about the math of that. We call that the 4% rule of thumb now because the math is slightly uncertain. Based on the famous Trinity study, the argument is that should definitely last you 30 plus years at that 4% rule.  Again, it’s loose, but at least it gives you a starting point, which is look at your expenses, not your income.

 

It’s roughly just 25 times your expenses. Hence, the $40,000 * 25 is a million dollars. It’s the same math, just backwards essentially. To me, savings rate and expenses go hand in hand. If you can increase your savings rate, cut your expenses, now ought to theoretically increase your income. That adds your savings rate as well.

 

If you can pull those levers, then you can increase your savings rate. According to Mr. Money Mustache’s shockingly simple math, that’s a phenomenal pillar article to the FI Community generally, you see basically the time it will take to get you to financial independence. There’s no secret to this. It’s just math essentially. I don’t have that pulled up in front of me, but I’m sure minion Scott will put in the show notes.

 

Basically saying, ‘hey, if I have a 5% savings rate, it’s going to take me this number of years to reach FI, probably 50 plus years. If I had a 99% savings rate, it’s going to take me a couple days.’ It’s just a sliding scale what your savings rate is. It’s a really powerful concept. Savings rate. Lowering expenses. It all ties together into this 4% rule. Yeah, that’s why we put them all together into one pillar.

 

Jonathan: What’s so interesting about this particular one, going back full circle to what Mindy said at the end of the episode is, it always starts with tracking your expenses, tracking where your money is actually going. If you really dive into the math, what you find out is that for every hundred dollars a month that you can cut from your expenses, you can shop $30,000 for what you need from that total number, that 25x. All this comes back together with this idea of the aggregation of marginal gains. It’s these tiny things.

 

When someone asks you how did you reach financial independence, and you say, ‘Oh, you know, I packed my lunch every single day and took it with me to work.’ They’re like, ‘What?’ It’s not that. Obviously that is a metaphor for all these little changes that you made in every single aspect of your life. When you put the sum of those together, it’s so much more than the individual parts.

 

Scott: I love it. I think that the 4% rule is an awesome target to give you an idea of how you’re going to build towards financial freedom. It gets a little bit more tricky when you get into real estate investors, and folks that are maybe doing something besides the index fund and traditional approach, because there is the cash flow analysis.

 

Once you combine those two things, as you begin progressing towards that, you have the ability to build a plan really. Like, ‘You know what, I’m ready to start making the leap and make a change into a new career, or pursue my side hustle full time, or take the leap into financial freedom.’

 

I think that the 4% rule is the starting point. You should build your math, based on that 4% rule and build your plan and then accept that, hey if you work it hard at these things, maybe you get lucky and a couple of things work out in ways that you didn’t intend, and you have more than that 4% rule in ways you didn’t expect, from a business.

 

Mindy: Absolutely.

 

Jonathan: When you have individuals in their twenties and thirties, who are latching onto all these skills, you’re not just going to do one of these things. You’re going to be trying a little bit of everything. I love that what you guys have done so well is you’re blending the real estate world, which for whatever reason has been silo’ed from financial independence for a long time. I think is ridiculous. You’re bringing those together. These models have to allow room for each other in them.

 

I think it’s coming up with your number using that 4% rule. Then looking at your cash flow, subtracting that from your monthly expenses, and then adjusting your 4% rule to come down and meet that in the middle, is an awesome place to do it. I think that the conversation is so much better when you add in the complexity, the fact that life is a bunch of choices. What are you going to choose?

 

Scott: Yep.

 

Mindy: Wow. We have covered so much today. This is going to be our longest show ever. It absolutely needs to be because there are so many powerful comments, and so much powerful information in this episode. I am so thankful that you guys took some time out of your day to share this with us.

 

We have a a segment that we ask the same four questions to our guests, every episode at the end. I would like to ask you guys those today, if you still have time.

 

Brad: Let’s do it.

 

Mindy: Okay.

 

Jonathan: Let’s do it.

 

Mindy: Alright. Our Famous Four questions are the same four questions that we ask to every guest. It’s actually five, because we don’t know how to count. Since we’ve got two guests, we’re going to ask both of them. Brad, I’m going to ask you first. What is your favorite finance book?

 

Brad: Oh, my favorite finance book. That’s a hard one. I think probably, The Simple Path To Wealth, by Jim Collins, or JL Collins as he’s known on the book cover. That’s one, for sure. The Little Book Of Common Sense Investing, by Jack Bogle, is another one that I like, in similar vein, talking about low-cost index fund investing. I think those two books really set me on a path to thinking about investing in a, to me, more intelligent manner than I previously was.

 

Mindy: Yeah. Jim’s book is amazing. That is such a great book. I have not read the Bogle book yet. I should put that on my list.

 

Brad: It’s a little book.

 

Mindy: It’s a little book.

 

Brad: You can read it in a couple of hours.

 

Mindy: Jonathan, what is your favorite finance book?

 

Jonathan: I would say it’s a toss-up. It would either be Rich Dad Poor Dad, or it would be Dave Ramsey’s Total Money Makeover. I think what’s so interesting about either of those choices is that there’s things that I explicitly disagree with, with both. It’s a change of mindset and I think that any book that gets you to take action is a valuable book. Both of those books are books that changed my way of interacting with the world. It would be one of those too.

 

Mindy: That’s awesome.

 

Scott: I want to give a quick shout out to Brad. He recommended a book called Thinking In Bets, by Annie Duke, which I think is one of my favorite books that I’ve ever read. I will read a lot of books. I rarely rave about them and recommend them to everyone, but that book just so perfectly encapsulated a mindset of decision-making, that I found to be incredibly effective. It’s about a poker player named Annie Duke, who thinks in bets and make her decisions based on playing the odds. Thank you for that recommendation, Brad.

 

Brad: Yeah, you [inaudible][00:33:58], Scott. Yeah, I’m still number one in the queue at my library. I actually haven’t read it yet, but just based on some podcasts that I-.

 

Scott: Oh. He hasn’t even read it yet.

 

Brad: It’s not funny. It’s ridiculous. I need to just buy it from Amazon, but based on what I knew about you, from your appearance on our show and what I’d heard about her, I just knew you would love that. Yeah when you said it was one of your favorite books, that was very, very cool.

 

Scott: I forgot you hadn’t read it yet. Oopsies. Alright. What is your biggest money mistake? I guess we’ll start with Jonathan.

 

Jonathan: Yeah. I think it’s one of these interesting things. I think it goes back to not beating yourself up about it. If you think about it just from an objective place, right now I am a full-time podcaster. I have a side hustle that’s now a start up business. I’m all in on this hand.

 

I said I was back to broke at 32 years old. I was back to broke because my initial choice that I made was to go all in on the traditional American plate of wealth, which is to find a good job with a good salary, get the advanced doctorate degree, and go down that path.

 

I got a pharmacist degree and that’s four years of undergrad, knowing that I was going to become a pharmacist. Four years of pharmacy school to become a pharmacist. Coming out of school at the age of 28 years old, with $168,000 in student loan debt. Spending the next four years paying it off, and coming back to 32 years old at broke. Let me say this. Right now, I have zero regrets about it. None. Not a single regret.

 

I’m telling you this is my biggest financial mistake, because it completely transformed the way that I look at money, and I would not be where I am right now without that story, that back story. That is clearly, by far, nothing even close, my biggest financial mistake.

 

Brad: Yeah. My biggest financial mistake was actually- it’s funny on the BiggerPockets podcast, but it was real estate investing. It was really real estate speculating. That’s my own stupidity. I got caught up in the fever in 2005, 2006, and really speculated. There is no other word than that. I bought like these vacant lots in this golf club community down in North Carolina. I thought it was this “can’t miss” thing.

 

It was just my own, like I said stupidity. There’s no other word than that. That has been a very, very expensive lesson. For me, honestly it was very hard to get over psychologically, but people like you, Mindy and Scott, and BiggerPockets, just by learning, going back to what we were talking about, the whole episode is thinking a little differently, just trying to learn, and get new skills.

 

I now look at real estate investing with a much more intelligent eye. It’s something that I’m finally, literally, 13 years later, finally my dipping my toes back into conceivably, thanks in big part to Scott, and conversations we’ve had. Yeah, a huge thanks to you guys, certainly.

 

Mindy: If you need to know more about real estate investing, you can go to this little website called, BiggerPockets.com. We have a forum. We have podcasts. We have a blog that tells you how to do it right, so you don’t lose money, so you don’t operate outside the law. Yeah, you don’t know what you don’t know. I also made some mistakes as a real estate investor, but I just still love it.

 

Brad: I will check out that little site called, BiggerPockets, so thank you.

 

Mindy: Thank you. Okay. Scott.

 

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

 

Jonathan: I was actually going to try and nip this in the bud when Mindy said it. It always, it always starts with tracking your spending. Every single time someone comes to you and says, ‘How do I get started with financial independence?’

 

In almost every case, when I follow up and ask, ‘How much does your life actually cost?’ That’s not something that they can readily produce. It’s like, ‘Okay, let’s go back and figure out where your money is actually going.’ All plans then, can come from there, but that is always my number one piece of advice.

 

Brad: Yeah. It’s hard to beat that. I would probably say take action. Don’t beat yourself up over past mistakes. I know that’s two pieces of advice there, but really take action. Every single Friday in our Facebook group, we say, ‘What was the one thing you did this week, what was the one action you took to make your life better?’ It could be health. It could be finance. It could be fitness. It could be anything.What did you do, what did you actually do this week?

 

Even if you just do one thing a week to make your life better, 52 a year, 520 in a decade. If you do 520 better things in your life over a decade, you’re going to have a whole heck of a lot better life. For me, it’s just take action. Yeah, like I said, don’t beat yourself up over past mistakes. You can’t worry about things you did wrong in the past. You just have to move forward, learn, and again take action, and it all comes together.

 

Mindy: Such a good piece of advice.

 

Scott: Alright. This is the toughest question. What is your favorite joke to tell at parties?

 

Brad: I’ll go first, since it’s a short answer. I am not a joke teller or a storyteller in any way, shape, or form. Scott, I feel like I need to get a whole list of puns that I need to write down for the next time I meet you. As of now I’ve got nothing, so I’ll turn it over to Jonathan.

 

Jonathan: No, you can’t get away with that. I texted Mindy. I texted Mindy. I was like, ‘I don’t know when the last time I told a joke was.’ Is this like a life skill that I just missed out, or do people do this?

 

Mindy: Yes.

 

Jonathan: Where does one learn about these things called jokes? I googled one before I came on the show. A guys shows up late for work. The boss yells, ‘You should have been here at 8:30.’ He replied, ‘Why? What happened at 8:30?’ Then, I found $5. See that is my [inaudible][00:39:44] for any joke that doesn’t land ever. Always. Doesn’t matter what-.

 

Scott: I love it. Alright. Moving on, did you guys hear about that one guy in the community that invested in Lifesavers?

 

Mindy: No.

 

Jonathan: Pudding? Maybe you’re talking about pudding cups?

 

Brad: This is a joke, I think.

 

Scott: They actually say he made a mint.

 

Jonathan: See? I’m equally bad on both sides.

 

Mindy: Okay. My friend Lindsay was over this weekend and she told a joke. We live in Colorado. There is legalized marijuana in our area. There’s actually a pot shop down the street from my house. It’s a source of contention.

 

I’m not going to go down that road, but we were selling Girl Scout cookies. I was going to take advantage of the fact that I have to live by this shop. I’m going to take advantage of their clientele. I went in to talk to them, ‘Hey, can I setup in your parking lot?’

 

They said, ‘No, you can’t do that because then it’s construed as we’re kid friendly and we’re not. We don’t want to lose our license, but you can be across the street. You can’t be on our property.’

 

She said, ‘Oh, did they say, “Weed prefer if you didn’t do this?”‘ Shout out to Lindsay for a joke that Scott is the only person who would love. Lindsay also tells your jokes.

 

Jonathan: I gave you the laugh. I was here for your laugh.

 

Scott: I’m just going to chime in here and say I think it sounds like a great joint venture.

 

Brad: Very good, Scott. Very good.

 

Mindy: This is what I have to deal with all day, everyday. Scott’s awesome.

 

Jonathan: You’re 13 episodes in and this particular question has still stayed in the Famous Four, so more power to you. We’ll be here for your many more awkward moments to follow.

 

Brad: I’ll say I just keep telling the jokes because people don’t have them.

 

Mindy: Yes. If you have a joke when our guests do not, you can tell it to Scott or Mindy. [email protected] or [email protected] We will keep a list of jokes for when our guests fall short. Just for the record, I also don’t have any jokes.

 

Okay, so our last question of the day is where can people find out more about you. Brad, go first and then, we’ll let Jonathan wrap it up.

 

Brad: Well, the most obvious place is Choose FI. Obviously, if you’re listening to this on a podcast player of choice, just subscribe to Choose FI. Choose FI. Could be one word, two. You’ll find it either way. That’s the easiest place.

 

If you’re interested in learning about travel rewards, I guess head over to- well, really at Choose FI, we have a fantastic podcast as we referenced before. I think that’s the perfect starting spot. If it sounds interesting to you, we’ve got a bunch of resources there or I have that other website I reference is, Travelmiles101. There’s some more info there. Yeah, that’s pretty much where you can find me.

 

Mindy: Awesome. And Jonathan.

 

Jonathan: I don’t have anything else to add on to that. That’s ChooseFI.com. We’d love for you to come check us out. It’s been a lot of fun putting this information together, and a lot more awesome conversations to come.

 

Mindy: Yeah. That’s for sure. Awesome. Well, thank you guys, so much for being on our show today. We ran so long, but really this is just the kind of show that you can’t stop halfway through.

 

Brad: Yeah. It was a real blast. Thanks for having us, guys.

 

Jonathan: Yeah. This was awesome.

 

Scott: Alright. That was Brad and Jonathan from Choose FI for the second time.

 

Mindy: Yeah. Wow. That was such a great episode. Having the conversation with them was fabulous, and to hear it all at one time would have just been so overwhelming. We split it up into two parts. I’m really glad we did. I’m glad that people listened to both parts. They have so many good points to say. They really prove that it isn’t that difficult to start down this path. Small tweaks in your life make huge changes down the road. I really, really enjoyed having them on.

 

Scott: I really love what they’re doing over there. They’ve build an awesome community over at Choose FI. I definitely think that folks should go ahead and check it out, if they’re interested in financial independence. Brad and Jonathan are just so passionate about this subject. They just have invested so much time into learning the nuances to help optimize you along that path. I always have a great time talking to them and learning from them.

 

Like I said, the travel hacking, the credit card hacking, it’s really a weakness in my financial plan where I ignored Mindy, but then I listened to Brad and Jonathan. Sorry about that, Mindy.

 

Mindy: Yeah. Thanks, Scott. No, I remember going into your office and telling you about this amazing thing that you could do with credit cards, and you’re like, ‘Well, you know, I make 1% on my Discover card so I’m good.’

 

I was like, ‘Well, okay. You’re not ready to hear it yet.’

 

Scott: You were right. You were right.

 

Mindy: I’m sorry. What was that, I was talking. Did you say?

 

Scott: You were right. You were right.

 

Mindy: I was right. I was right, but hey, now you know. We were just looking through credit card offers today. We had a card and we got rid off it because we didn’t need it anymore. We had used up all the points. There’s a card offer right now for 75,000 bonus points if you spend $20,000 in the first three months, which I thought was ridiculous. Who has $20,000 to spend? Who has $20,000 to pay it off?

 

Scott: Hey, that could be a great purchase for a flipper or a rehabber. Maybe I go buy a property, and I get that card. I get 75,000 bonus points.

 

Mindy: That’s funny that you said that because that was my first thought. We used to flip houses. Well, we still do. We just haven’t found one yet. We would buy the house and then put everything on these credit cards. It helps you keep track of your spending on the house because everything’s on one card. You get these massive bonuses, so that’s how we would do it. Then sometimes when you’re living in your flipped, you need a vacation.

 

Scott: We are not recommending that listeners go out and put $20,000 in a credit card that they don’t have.

 

Mindy: That they don’t have.

 

Scott: The difference here is, maybe if I were to do a flip, I would have that cash in the bank or in readily accessible liquid stock. Something that I could access within a week or two in case the flip went south, so that I’m not carrying 20% interest credit card debt. It would just be a good way to get a nice, ‘Hey, I’m going to track all my spending on this one credit card I opened up for this purpose, and then I’m going to pay it off before I begin accruing any type of interest or penalties for that card. Then I’ll get 75,000 bonus points as a little icing on the cake.’

 

Mindy: Yes. That is exactly right. There is no point paying 20% interests on purchases just so you can get free travel, you could just pay for the travel instead and pay less money.

 

Scott: Yep. Absolutely.

 

Mindy: Alright. This one went really long again, so we should get out of here and say thank you to our listeners. Next week we have Joel Larsgaard talking about how bankruptcy affected his life and his financial future forever. Bankruptcy as a kid.

 

Scott: Before we close out, I do want to petition all you listeners for a quick favor. If you like the show or if you didn’t, but hopefully if you did, you will give us a review on iTunes which really helps us out in the rankings, it helps spread the word to other people, and it just makes us feel good.

 

Additionally if you have any tips for improvement, please send them to us and we’ll try to edit those into the show. We want to make this show full of value for you. We want to make it fun, and engaging, and then full of information so that you can increase your odds of rapidly moving toward financial freedom. Send us those tips at [email protected] or [email protected] Give us some reviews on iTunes and share with your friends.

 

Mindy: We would really appreciate that. Alright, Scott. Thank you so much for your time today today. We should get out of here. For BiggerPockets Money, episode 14 part two, this is Mindy Jensen. Over and out.

 

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In This Episode We Cover:

  • College Hacking
  • Their advice on college hacking
  • Cut the cord
  • Knowing one’s priorities
  • Does Brad has a formal employment right now?
  • Side hustles
  • How they started their side hustles
  • Is it risky to start a side hustle?
  • Savings rate in the 4 percent rule
  • What the 4 percent rule is
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Not every idea is a great one.” (Tweet This!)
  • “Don’t beat yourself up over past mistakes.” (Tweet This!)

Connect with Brad and Jonathan

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.

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