005 - Dave Ramsey

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Transcript

Time Speaker Text Tags
0 - 9 Jonathan Mendonsa Well we're back to the studio. 2017 is here. This is our first podcast of the year and thankfully Brad is here with me again today. Hey Brad.
9 - 11 Brad Barrett Hey Jonathan How's it going. Happy New Year.
11 - 14 Jonathan Mendonsa Thank you. Thank you. Hope you had a good time over the holidays.
14 - 15 Brad Barrett I did indeed.
15 - 18 Jonathan Mendonsa Spend some time with your family decompress a little bit.
families
18 - 23 Brad Barrett Yeah yeah it was definitely nice and relaxing. We went up to New York to visit our families some good times.
families
23 - 180 Jonathan Mendonsa Awesome. Well so as the article indicated or as the title indicated earlier today we're going to be talking about Dave Ramsey and specifically how he how we should be channeling that information in the community that we're in the financial independence space. And so I guess to start off let me kind of give you you know my history with Dave. I've listened to many podcasts in my day and I've read probably even more blogs and over that period of time one name stands out to me really more than any of the others. And that's Dave Ramsey and I've been impressed by him for really over 15 years now Brad and I. We have big egos Probably but there's nothing really special about us. We're sixth or seventh generation media personalities. And I don't want to say that we're a dime a dozen. But there's a lot more of us to choose from. But Dave he was one of the first generation personal finance coaches. Nobody was doing this back in the 90s and apparently you know his backstory I think he had a million dollar real estate portfolio and he crashed hard I think into bankruptcy and then he pivoted and he started a radio show helping people avoid his mistakes. And about the same time he created a small book called Financial Peace and he started offering it as a free resource to his church. But the radio show gave him a platform to sell this book nationwide and he turned it into a multimillion dollar dynasty. So he created a business model that predated blogging. And that's pretty cool. So I mean if you want more information about that I'm sure you can find it on this Web site. But Dave gives great no nonsense advice to people that have just generally gotten in over their heads and needs some help digging their way out. And he was inspirational to me even though I ignored a lot of his advice when I was taking out my loans for pharmacy school. His message you know that debt carries emotional stress limits your options. And you know has the potential to ruin your life. You know it stays with me. It's a powerful message and I think that really everybody would benefit from listening to him. So I would not be here today doing this podcast if it weren't for Dave. And I want to start out by saying that I really do owe him a debt of gratitude for that. But one of the things that I always found very frustrating about Dave is his unyielding stance on debt. He lumps it all together so student loan debt real estate that credit card debt all evil and many people would call his show. I was one of them to give their specific situation and try to get him to give their blessing to take out some form of debt to achieve their goal. And I will just say 100 percent of the time. He never caved. He didn't cave. And to be fair he's kind of locked in. He's built a media empire around saying that he would never take out debt. And he's made millions but Brad and I we have not made millions. So we are not locked in. And we can we can change our opinion as we get new and better information. And in fact we're Brad wouldn't you say we're crowdsourcing our information.
backstory, blogger, college-loans, debt, hustle, landlording, ramsey
180 - 193 Brad Barrett Yeah without a doubt. I mean we want our community to be involved. We want to learn from all different blogs. We're trying to experiment and figure out what works. Yeah we certainly don't have any sacred cows. We're just trying to figure this out along with you guys.
blogger
193 - 239 Jonathan Mendonsa Absolutely. And I would say even more so we're not gurus it feels kind of slimy and we just avoid them in general so we're not gurus just regular guys just sharing what we've learned so far and we're hoping that this will encourage you to share what you know with us and we can you know get better together. So now literally for me this is 15 years later and Brad and I are building this platform. And I wanted to take this opportunity to review and evaluate Dave's teaching philosophies where we line up where we go our separate ways. I think it's going to be a useful exercise for me and I think it's what's going to make today's podcast so interesting. And what I'm going to do is I'm actually going to run these ideas by Brad who has never followed Dave has really no interest in Dave I guess outside of me dragging him along. And I want to get his input as well so I hope you enjoy this.
239 - 270 Brad Barrett Yeah I think that's going to be really interesting for the audience just because I know essentially nothing about Dave Ramsey. I know he has some steps. He has something called the debt snowball I believe. And I also know that he's very anti credit card and I am potentially you know very pro credit card and in many instances that's a lot people know about travel hacking. So yeah I mean I think I think this will be kind of cool to come in this you know into this as me essentially knowing nothing and we can talk through it see where we agree disagree and kind of go from there.
debt, ramsey, travelrewards
270 - 297 Jonathan Mendonsa Absolutely. All right so let's talk about the Dave Ramsey Show. So Dave Ramsey has seven baby steps that he walks through. You know they're pretty simple so baby step one get an emergency fund of $1000. The first step get an emergency fund of a thousand dollars in the bank. And Dave says that this is to prevent Murphey from knocking on your door because if you don't have a plan Murphy's going to come and you know I think it's a great idea. I don't think Brad.
emergencyfunds, ramsey
297 - 297 Brad Barrett Who's Murphy.
297 - 299 Jonathan Mendonsa Who's Murphy alright so real.
299 - 300 Brad Barrett Yeah.
300 - 304 Jonathan Mendonsa OK well so Murphy is have you ever heard of Murphy's Law.
304 - 304 Brad Barrett Of course.
304 - 333 Jonathan Mendonsa OK so you know what can go wrong will go wrong. That's who Murphy is so Murphy. He's coming for you if you don't have a plan. Brad has always had a plan so never had to worry about it. You know I don't I don't take the small stuff for granted. If if everybody had some of these basic concepts locked down then payday lenders would be out of business. But yet I know people personally that have had to use payday lenders and they're just one emergency away from total financial disaster. I know people that don't have checking accounts. That's crazy.
333 - 333 Brad Barrett If you not have a checking accounts.
333 - 348 Jonathan Mendonsa Yes. So you know I think let's not assume that everybody is in the exact same place as we are you know from either from an education perspective or a financial acumen perspective. You know people are in different places in life. So for that person a thousand bucks to make a world of difference.
348 - 404 Brad Barrett Yeah I completely agree about that. And I also want to take a step back and say it's easy for us to sit here and say we're reasonably intelligent you know we know we've been researching financial independence for months and years and what's quote unquote obvious to us is not obvious to everyone. Right. And just from hearing about baby step number one I completely agree. I mean if you don't have a thousand dollars saved up your house is on fire. Your hair is on fire. That is an emergency. That is a true emergency because your life you have to I mean think about the stress of that right every single day if something happened if you were if you blow a tire and you have to spend whatever it is 100 200 bucks to get a new tire like that's a catastrophe. I'm kind of annoyed. Obviously if I get a flat tire or have to spend a couple hundred bucks and I don't want to but does that impact my life and all know it impacts my life zero. But man that sure as heck would if I had no money. I couldn't imagine.
Brad_Catchphrases
404 - 509 Jonathan Mendonsa Yeah absolutely. You know Dave spent years and years just on radio shows with people that are that close to the edge and a thousand dollars can be enough to stave off financial disaster and he's very protective about that. In fact I love it. Keep your grubby hands off it. Don't touch it. It's for an emergency. It's not so you can get your nails done. It's an emergency. So clarify what that is. Make sure you have that. And I think that's a great baseline. I don't think anybody would argue with that. Just get a thousand dollars in the bank. You know for much of this show. Brad and I are going to assume that you have a lot of the basics under control. You know we're not the Dave Ramsey Show. For the most part we're not trying to get you from the financial cliff. What we're trying to do is help you optimize your life and take it to the next level. But this is an amazing conversation to have. So we're going to assume that you have a checking account that you don't use payday loans that you know how to balance a budget. That you know how to live within your means and then what we're planning on doing is opening up some advanced techniques to help you game the system and get more for every single dollar that you bring home. But if you don't understand how all this works and you're starting from scratch go buy the book the total money makeover. It will change your life. I have no problem recommending that. OK. So that was step one step two baby step to pay off all debt except for your mortgage. So in this step Dave recommends using what he calls the debt snowball so you make a list of all your debts you're going to rank them in order from the from the largest to the smallest you're going to make the minimum payments on all the debts that you're going to throw every extra little bit you have on to the smallest and you're going to then congratulate yourself knocked that one out and then you're got to roll what you're paying into that into the next one. Every extra spare penny goes into that next on your feet this until you're completely done. There are some obvious problems with this.
debt, emergencyfunds, lifeoptimization, ramsey
509 - 519 Brad Barrett Right. I think the first one that jumps out to me is you know most people would argue most financial experts would say pay the debt with the highest interest rate. Right.
debt
519 - 539 Jonathan Mendonsa And there's a name for that mathematicians people that can do basic math often refer to the the debt avalanche. So instead you know make a list of all your debts and you do exactly the opposite. You rank them by interest rate. You take a look at the ones with the highest interest rate and you pay that one off and then you roll it to the next one with a slightly lower interest rate and so on and so forth until you're finished.
debt
539 - 546 Brad Barrett Yeah but I actually like Ramsay's point of view here. I mean because the debt avalanche really that takes the psychology out of it.
debt
546 - 547 Jonathan Mendonsa Yes.
547 - 556 Brad Barrett Like psychology with finances. It's essential. I mean for most people who are living paycheck to paycheck cash flow is everything.
mindset
556 - 556 Jonathan Mendonsa Hundred percent.
556 - 578 Brad Barrett Right. So I mean if they can pay off that smallest debt then either a they can just simply not have that payment from month to month or be as I imagine we're going to go with Ramsey is with this snowball as you take that smallest debt payment that you would have been paying and then pay it. Add that to your next smallest debt. Is that fair.
debt, ramsey
578 - 639 Jonathan Mendonsa You know 100 percent you steal my thunder from me Brad. No I'm with you. So I think you got to be smart about this. You know I don't think everything is either one way or the other. I've kind of come to let's use a common sense hybrid on this one. For instance if you have a payday loan that's at 200 percent interest rate and then you have a credit card so your payday loan your twelve hundred dollars on a payday loan and it's up a 200 an interest rate or you and you know a hundred dollars on a credit card and it's at a 40 percent percent interest rate what does Brad always say your hair is on fire pay off the payday loan that is that is killing you. Forget it. Take care of the payday loan and then come down and it a smaller quantity. But in general what I would probably recommend you do is group all your smaller ones together try and tackle those first. You know if they're kind of comparable in rate. Focus on the ones with a higher interest rate take care of those first. If you have any payday loans go ask for help from a family member. I mean this is the time to just get someone else involved and do whatever you have to do to swear that it will never happen again. But get out of that because it will ruin your life. That's the last time I mentioned payday loans. I promise.
Brad_Catchphrases, debt, families
639 - 649 Brad Barrett Yeah hopefully many of you out there ever contemplating payday loans. But yeah clearly I like that hybrid approach. You know if something is extraordinary then pay it off. I mean that's how it goes.
649 - 675 Jonathan Mendonsa Let me give you an example so I'm one of these people that have bought into that Debt model for many years before I finally am now coming back to the other side and there were different decisions that made sense to me at the time to get there. And that's fine. But I had a car payment of $350 a month. It was a $15000 car. And and that is that a two and a half percent interest rate. And I have a student loan at the time as hundred and some odd thousand and that was at a 6 percent interest rate Brad which all would you pay off.
college-loans, debt
675 - 678 Brad Barrett My normal inclination would be pay off the 6 percent.
678 - 745 Jonathan Mendonsa I was with you. I mean the payment wasn't killing me. And it was just predictable math on that one I was not close to the edge. They were both big numbers where I couldn't have either of them done in within a year. Was going to take me longer than that. So in that particular scenario it just made sense for me to go ahead knock out the 6 percent. I mean I think it's one of those things where if you're talking about rolling these up within a month or two if you just focus on them then I would say 100 percent the snowball is fine but let's not look at everything inside of this vacuum. Everybody's situation is a little different and that's what they're talking about if you're if it's going to take you a year or two years to pay something off in those interest rates have real numbers attached to it. Get your mind right with the psychology get some little wins by paying off the five hundred dollar couch payments all the dumb stuff that you signed up for. Get all that taken care of and then once you're done with that one and do it once you're at those higher dollar amounts go and look at the interest rate and work your way down from there. So Dave is selling a simplistic one size fits all package. And I get it and it's fine. I don't really take issue with it. But that's not the space that a lot of our audience is going to be in. And so you know we're allowed to do both. We can we can use some common sense and we can use some psychology we can use math.
745 - 781 Brad Barrett Yeah I think that's important. What Jonathan just said about the one size fits all. And I've found this having produce content for my other web sites over the last couple of years. You lose a lot of nuance sometimes when you give advice to a sizable audience. And I think it's important for you as a consumer of information to say OK this is this is someone producing content for millions I need to look at this and say OK 90 percent of it or 80 percent of it whatever it is fits for me but I need to adjust X Y and Z. I think that's that's essential. Don't ever take anything as gospel. Just take the essential information glean it and then make the adjustments you need to make for your life.
lifeoptimization
781 - 834 Jonathan Mendonsa All right so either those models will work but but I do realize the emotional power of getting rid of smaller debts and rolling the payments into the next one. So I want you all to go through this little scenario with me and this is I'm sure very common for most of middle class America. You have a mortgage that's fifteen hundred dollars you have a car two car payments once $350 wants $250 you have a student loan payment that's $300 a month. You pay $500 a month on food and that's on a good month. When you go to the restaurants and get out of control it goes all the way up to 1000. You have about $500 in recurring bills through cable cell phone bills the electric bill that sort of thing. And then you have a little bit of credit card debt nothing fancy but your minimum payment is $150 a month. So you add that up and your cost of living is $42180 that's fine that there's nothing nothing at all with that I would say that's probably it. Brad is that an entry level middle class lifestyle right there.
debt
834 - 836 Brad Barrett Yeah it looks looks reasonable.
836 - 914 Jonathan Mendonsa OK. So once you take a look at all those. Let's take a look at what it would mean to actually get out of debt for that person regardless of how you did it if you stacked it from small to largest Let's say you did just take that opportunity to do what Dave says and pay off all of your debt. So everything except for the mortgage you get rid of the car payments the student loans and the credit card bill. So those are the three things that you do and it takes you two years to do it but you take all Dave's advice and you do it. If you cut all of those things from your life that is going to save you about $10000 a year. And it's not just $10000. It is like getting a massive tax free raise. That is money that is then there for you for whatever you want it is free from Medicare Fika state tax Medicaid. It is totally yours. Now I'm not saying you don't pay taxes on it but you are already paying taxes on it and then what with what was left you were having to send it to those different types of debt some now that is $10000 of take home money that can go for whatever you want and you can use that to start a business. You can use that to experiment. You can just put that into an investment account and because you've done that not only is it now making money for you but because you don't need that to survive anymore. Your financial independence number which is a number that maybe Brad can talk about a little bit is much much less.
college-loans, debt
914 - 997 Brad Barrett Yeah that's funny. As Jonathan was talking I was you know waiting to jump in actually because I think of it differently I think of it in terms of that financial independence numbers so under this scenario and I know it's hard to hear these numbers and not see them on a paper but we're saying this person reduce their cost of living from 42000 and changed to 30000. And they also a mortgage is part of that. So theoretically they could take all of that extra money that we're spending and pay that additional principal on a mortgage. Now that obviously is personal preference. I'm not sure necessarily that we would recommend that but if you're talking about financial independence it's just a simple function of your annual costs and we say if you use what's known as the 4 percent rule which is if you take your total pot of money you can essentially withdraw 4 percent of it per year and live on that money. And in theory that money should last forever. That pot of money because you're getting a larger return hopefully a 7 to 8 percent return and you're only pulling up 4 percent. It should be based on some calculations that you can find online that should last in perpetuity. Hopefully in a perfect world scenario. So that $30000 a year you would the 4 percent. The way that it works is you multiply that by 25. OK. So 30000 times 25 is $750000.
997 - 999 Jonathan Mendonsa About to say he's doing math live we'll see what happens.
999 - 1017 Brad Barrett Yeah let's hope I'm right on that. And that is the pot of money you would need to live off of to be financially independent. So right so most people in the fi community would say you are financially independent if you have $750000 in that pot and your cost of living is $30000 a year.
1017 - 1021 Jonathan Mendonsa And then what and what is it Brad if you're at 42000. So you didn't pay those off.
1021 - 1053 Brad Barrett Yes. I mean it would be over a million in that case. So just by paying off that you know whatever it is you know little less than $1000 a month makes it so that you need $250000 or less in that pot of money. So it makes a huge huge difference and I mean taking this a step further if you could pay off that mortgage then that's $18000 of that 30 then you're only $12000 and then you're talking about Jacobs style from your ERE. That's a totally different ballgame.
1053 - 1066 Jonathan Mendonsa I never felt guilty when reading a blog and I felt guilty when reading Jacob's blog. It's a great blog and everybody should read it. I think it's early retirement extreme dot.com but I just feel like I've done something wrong.
blogger
1066 - 1110 Brad Barrett Yes seriously if you're not living in a trailer and living off of $8000 a year. But but you know in this scenario Jonathan laid out like you know this is how you think about financial independence. It's cut. Cut down your expenses as much as you can pay off this debt that's just hanging over you and then you just have ongoing expenses which are just basically whatever utility bills you have et cetera and your food and entertainment. I mean for most people it's I mean it's hard to spend more than a couple of thousand dollars a month in that just in a normal course of life. Right. Right. And then you know you're out a scenario where your yearly expenses are 30000 or even less potentially 20000 and you only need half a million in a in a retirement account or in your pot of money to be at FI. I mean that's pretty remarkable.
debt
1110 - 1239 Jonathan Mendonsa And honestly that is the way I think when you hear me talk about getting rid of a recurring expense. It's that 4 percent rule that's going through my mind. And for me and I know that's not realistic. But I don't think about that when I spend a lot of money on something one time if it's a one time purchase. That doesn't to me it doesn't click in my brain that that's an ongoing thing that's going to increase my retirement number. It's a it's a one and done type transaction. But when you have recurring expenses like your cell phone bill and your cable bill those are things that are preventing you from retiring early. Now I probably do need to step it up and look at my one time purchases. But as it is that's way my mind works. So one of the things that I've noticed in these baby steps and again it goes back to you know he's trying to keep it very simple but in his course even in his extended financial peace course he doesn't really give you actionable tips at decreasing the cost of your life. If I remember correctly his advice goes something like have a yard sale sell your car work a second job deliver pizzas. That seems to be his go to now. Somebody can correct me I know Brad can't but somebody can correct me if I'm wrong about that. You know maybe that's fine for three bullet points on a sheet of paper but we're not selling a finely packaged book out to millions of people. We're doing a living podcast and a blog to go along with it where we can create content and we want to do better than that. We want to actually give you extremely actionable tips that show you exactly what you can do that are simple that are doable that are not going to make you live in a shed out back but are actually going to empower you to decrease the cost of your life by 20 30 grand a year. So we will come back to that another article. We've got one coming up that we're going to be doing called the ultimate Costco meal plan and we're basically looking at slashing that food budget completely in half. All right so now this is the other one this is the sacred cow. This is probably the one where I really can I take issue with it. Dave Ramsey will tell you to hold off on your match with your 401K while you're paying off debt I cannot in good conscience make that absolute recommendation to anybody. I have no problem with you not maxing out your 401k. No big deal that's fine. But we don't walk away from free money. You always do the match.
401k, blogger, debt, mealplan, podcaster, ramsey
1239 - 1255 Brad Barrett Yeah I'll go a step further. That's the first time I've ever heard that. I think that's the worst advice I've ever heard in my entire life. And you should not listen to that. And I would say to me that with like almost invalidate someone is a complete moron. But I will go with. You know maybe he has some legitimate reason.
1255 - 1316 Jonathan Mendonsa But we'll talk about it. I'll try to I'll try to help. I'll try to help sell you on his idea but know that even after I can see his point I still walk away from it. So he makes the case that you are being chased by the cheetah. So you are you are in the field and the Cheetah is running after you and that this is a short term thing and you need every extra penny you can get. Because he's he says cheetah. You always say your hair's on fire and maybe for some very specific situations where someone is close to the edge like a payday lending situation I think probably we got to again keep in mind that this audience is important. He's focusing on people dangerously close to the edge. Maybe maybe. But you absolutely can't apply that to everyone and he is sending this book out and millions of people are purchasing it. And if you have some debt at 5 percent you can't you don't you never pass up on doubling your money which is one hundred percent. So you put you know a hundred dollars in the bank every two weeks. Your employer matches it at 100 percent and you don't pass that up to pay down five percent interest. That is extremely stupid math.
debt
1316 - 1337 Brad Barrett Yeah. Without a doubt. I mean clearly if we're talking these ridiculous payday loans that's a different scenario. 200 percent interest but yeah I mean from an outsider outsider's perspective he's not even financial. Personal Finance 101 He's personal finance kindergarten and unfortunately and I don't mean to sound like a jerk or elitist in any way shape or form.
debt
1337 - 1342 Jonathan Mendonsa You're going to have some people hating on you for that. please don't hate on us. We want good comments. Leave us kind comments.
1342 - 1393 Brad Barrett No no no. I mean I would go. I would put that in a positive light. OK. And I mean this sincerely. There aren't tens upon tens of millions of people who are at that personal finance elementary school level. And that's not their fault. That's not me being a jerk and saying I'm fantastic. I don't mean that in any way. I think we don't ever get any education on finance. Right. I mean and that is a crime. And Dave Ramsey from my perspective does a wonderful service to this country that he is helping people realize that this is an emergency. If you don't have a thousand dollars saved up that is an emergency if you have credit card debt or payday loans. That is a true emergency. He is doing such a service to America. So believe me I sincerely mean that.
debt, ramsey
1393 - 1398 Jonathan Mendonsa But but you have graduated passed what he can offer you I that and I feel the same way.
1398 - 1400 Brad Barrett And hopefully our audience has graduated.
1400 - 1400 Jonathan Mendonsa Absolutely.
1400 - 1419 Brad Barrett Much of them and many of you have not. We're going to get to some things. Baby step 3 about having months of savings. Many of you don't have months of savings and that's perfectly fine. We can even make an argument whether that makes sense or not. It depends on how you consider savings. But but that said hopefully our audience can take Dave's advice.
savings
1419 - 1428 Jonathan Mendonsa And that's what this is is an I mean we're we're trying to figure out what can we still use what's really good and where. Can you just say you know what Dave love you I agree to disagree.
1428 - 1430 Brad Barrett Yep agree. Agree.
1430 - 1461 Jonathan Mendonsa OK so here's a math question. I don't even know if we can we can answer this today but it's one that I've thought about I just haven't come up with the answer yet so if you have an answer on this I'd love to hear your opinion. I really do want to make this a crowd sourced podcast that brings you in. And so if you've thought about this and you came up with a decision package for us and let us know we would love your input on this so if you were financially able to max out your 401k and have money left over to pay down debt but it's going to take you now four years instead of two years would you. And what would be a deciding factor.
401k, debt
1461 - 1467 Brad Barrett Right. Yeah that's that's not something I've ever considered before. I mean so pay down debt in that sense.
debt
1467 - 1494 Jonathan Mendonsa Let's say So let's say We're talking because we're now where it's at. It's a significant number right so let's say we're talking about 60 grand. You've got to pay off you have a pretty high income. That's why this makes it more appealing because a 401k goes in pretax so you're in a 30 percent maybe marginal tax bracket maybe even a 40 percent marginal tax bracket. And so you can completely max out your 401k is no problem and have money to pay it down but just due to the numbers it's going to take you an extra two years to pay off the debt if you do it that way.
401k, debt, highincome
1494 - 1498 Brad Barrett Yeah. So to me it depends what kind of debt we're talking about. Right. If we're talking about.
debt
1498 - 1502 Jonathan Mendonsa Let's say 6 percent interest 6 percent doesn't matter but it's a 6 percent interest rate.
1502 - 1507 Brad Barrett Yeah that's that's tough. I think there's not an easy answer to that. Right.
1507 - 1513 Jonathan Mendonsa I don't have one I have been trying to figure out what number I would need and I frankly. Is it OK to say I don't know.
1513 - 1514 Brad Barrett Yeah of course.
1514 - 1519 Jonathan Mendonsa Can I leave it out there and someone can leave us a comment and then we'll come back to it in a few weeks. Is that an OK format.
1519 - 1526 Brad Barrett I mean I yeah I think without a doubt not only that but you actually have this in your personal life and you have student loan.
college-loans
1526 - 1536 Jonathan Mendonsa I made a choice. I made a choice but I wonder what would have happened the other way and what would be can the math get us somewhere I don't know what the math is you're an accountant help me.
accountant
1536 - 1555 Brad Barrett Put me on the spot. Yeah I mean I'm not sure. I think with all this stuff it's not just street math. And I think that's what I want to get across more than anything like if you listen to the ultra optimizers. They would disagree with me. They would say this is math. It's a math equation. That's all you can consider. I reject that.
1555 - 1620 Jonathan Mendonsa I'm with you I'm with you and here's why. Because I have been more frugal than I would normally be in order to pay down debt. It is. I've paid out a lot of debt and I made a choice not to max out my 401k. I couldn't necessarily figure out what the math was going to be. I knew I was going to get the match. And I'm very glad I did. I have no regrets about that. It is absolutely done marvels for my 401k to take advantage of the match. But I did not max out my 401. Because I needed that psychological boost of that extra 10 grand or whatever it was to get those loans paid off and I'm four months away or three months or two months or something like that I should be done in April from my from my loans being completely gone and I'm so glad that I did not squander that extra 10 grand because you know what if you don't see that dial move down and get closer to zero at some point you might just give up or maybe you have a life change like your you know your wife stops working or you have a child or other things happen you don't know what's coming. But when you have debt that's paid off. That's a post tax dollar raise. That's the way I always think about debt that's gone. It's a post tax dollar raise. Where else do you find that.
401k, college-loans, debt
1620 - 1662 Brad Barrett Yeah I agree totally. And in my personal instance we did not maxed out our 401ks either. Honestly that's not something I think I've ever mentioned on any podcast before. But I did up to Obviously the match. I think I put in maybe 10 or 11 percent of my income plus the match. You know that was a decent number every year. Right. And that was something I was comfortable with. Now I think if you if you read an article we're going to talk to hopefully Brandon from the mad Fientist at some point on one of our podcasts about his article talking specifically about how you should max these things out. And you know he has looked at this every which way and comes out even if you have to pull the money out with the penalty.
401k
1662 - 1670 Jonathan Mendonsa That so excited that we're going to be doing that. That is going to be that me a lot of fun and I'm going to these questions are going to come back up I'm not just letting this slide. I want someone to tell me what I missed out.
1670 - 1701 Brad Barrett Yeah without a doubt. But I mean for me it was also psychological. It was I would rather have this money in my investment account or my bank account than in this 401 K which at that time naively I wasn't aware of ways to pull that money out. So to me it was locked in there until I was 59 1/2 and that was not good enough for me. So for me psychologically just like you Jonathan wanted to pay off your student loans. I like the psychological satisfaction of knowing that I could pay off my mortgage tomorrow.
college-loans
1701 - 1807 Jonathan Mendonsa Yeah that's huge. And I get that. And you've got to know what is the math on that as well I mean let's say you have the option. Well you know what. We're not going to go into that I'm going to we're going to save that one for Brandon and we're going to get his there and have that conversation. So let's move on. 30 minutes we're all baby step three. But I guess it took Dave an entire book so we're not doing too bad. OK so baby step three get three to six months of expenses in savings. So I am right there at the door took me a very long time and I think it shouldn't take everybody this much Hopefully you don't have as much debt as I had if you were kind of working through that stage. But it took me a long time to work through step two. So I am now getting close to step three and I've shared with you how I've parted with Dave on a few things. But I would say that in general I found his advice useful and whether or not I would have come to those same conclusions on my own. That's the process that I took. So this is one that Brad has chided me on if you will several times over the last couple of months and that is the importance of having a solid emergency fund. Brad specifically has stated that he wouldn't be able to go to sleep at night if he didn't have a fully funded emergency fund. I think it's just kind of that poor kid and me. I've never had money as a child or you know even as an adult I wasn't a frugal person that came in and I burned a hole in it until it was gone. And I just did that all the way up through maybe the age of 16 or 17. And then right as I was starting to learn some of these financial techniques and why it was important at that point I was already going to go into pharmacy school and I knew I was going to be incurring six figures in debt. So I've always been close to the edge. I've never not been close to the edge. And so for me in my 30s now this will be the first time that I've ever been in a position where I can start thinking about things like an emergency fund so I'm not saying I feel safe here but I'm probably going to feel weird when I have it because I've spent more of my life not having it than having it.
debt, emergencyfunds, savings
1807 - 1834 Brad Barrett Yeah I think it's going to be very cool to watch you as you go along here. Right. We talked about this in episode four which was where I interviewed you and I was I was honestly pretty surprised how close you live quote unquote to the edge right. But you had a legitimate reason for it. You know you said I have a six figure income that's coming in reliably every bi weekly whatever it was that sense. Right. And your goal was to pay down your student loan debt. And that makes sense to me.
debt, highincome
1834 - 1867 Jonathan Mendonsa And it's calculating the chance of that emergency and then if that happened what what would my backup plan be. So I'm not going to roll into my credit card specific roll all that back out again but if I were to have an emergency and incur five grand of expenses I mean I could cover it. It wouldn't end me so anyway anyways going forward I am still curious you know Brad you talked last time that you had these funds and I'm kind of curious. Tell me about your emergency fund strategy. So three six months of expenses. Where is that. I mean is that just in a bank account do you put that in a taxable account. What do you do.
emergencyfunds
1867 - 1879 Brad Barrett Yeah that's a good question. And you know in all honesty we probably have about 12 to 24 months of expenses. Yeah. I mean it's I guess it depends what your definition is.
1879 - 1888 Jonathan Mendonsa So I'm not counting the 401k right. You asked me about my for my emergency fund last time I obviously do have a 401k. I was not counting that right.
401k, emergencyfunds
1888 - 1915 Brad Barrett Without a doubt. We do not want to tap your 401. Early I know there are different avenues to do that. That is not something we promote in almost every scenario. That's a bad idea. So yes clearly we're taking any retirement accounts and not considering them here so I guess are we saying that savings or emergency funds are any type of regular you know traditional savings or taxable accounts as people would call them.
emergencyfunds, traditional
1915 - 1921 Jonathan Mendonsa Well I guess that's what I'm asking. I don't Know probably is a VTSAX is that is that a for you would that be a place you could have them because you can access it.
indexfunds
1922 - 1946 Brad Barrett Yeah I mean and that's what I struggle with so yeah I mean if we're talking the amount you know the money that I have in savings or investments outside of retirement accounts then yeah I mean we have a significant amount in Vanguard in VTSAX we have. We also have a Fidelity account I think where we have some individual stocks and I don't recommend that generally. But we also have.
indexfunds, savings, stocks
1946 - 1947 Jonathan Mendonsa I kinda want to try it.
1947 - 1966 Brad Barrett Yeah I mean it can be kind of fun. You know I invest in Berkshire Hathaway. And there's a company here in Richmond called Marquel which is actually people call it a mini Berkshire. Yeah. It's a really impressive company and so I don't I don't recommend people necessarily starting with individual stocks but this is small.
stocks
1966 - 1976 Jonathan Mendonsa Yeah I think it's a percentage. I mean we all have rules that we follow and then rules that we break. And so one of ours is I think Brad and I have settled on this. The VTSAX all the way.
indexfunds
1976 - 1977 Brad Barrett Agreed.
1977 - 1997 Jonathan Mendonsa Very very settled on that probably not going to change that opinion that I can see maybe and probably gave me more passion about that as we bring Jim Collins on the show but we always deviate from the mean at some point. And I plan on building a small little fund on the side. It will be you know less than 10 percent of my portfolio because I'm a man and I need to.
1998 - 2030 Brad Barrett Yeah. Yeah I mean you can't be dogmatic about anything. I mean we need to experiment have a little fun I mean it's not like you're going and blowing it on a Corvette. You know I'm investing in Berkshire Hathaway which is a wonderful company so I can sleep at night with that but so also we have an online bank that's giving at this point in time less than one percent interest. So this is not lighting the world on fire in any way shape or form and that actually gets into into a separate question which is. Jonathan said VTSAX could be your emergency savings rate you know because you.
emergencyfunds, indexfunds
2030 - 2039 Jonathan Mendonsa Don't steal my thunder Brad I have a I have a life hack for individuals coming up so don't hold on to that. We're coming back to it. OK. Let me.
lifeoptimization
2039 - 2081 Brad Barrett I do just want to finish this up real quick. I'm going to try not to steal his thunder but this is something that I've thought of previously which is does it make sense for me to leave all this money in our online bank or in a savings account or whatever you want to call it when that takes a day or two or three to transfer back to our checking account. So I mean it's not immediately accessible. Right. Whereas you can sell mutual funds and transfer them back from Vanguard in the same two to three days. Right. So does that eliminate the need for a traditional savings account. I don't I don't know the answer but I've definitely thought maybe we should be moving that money that's just sitting there in this stupid online bank getting point seven five percent interest and put it into VTSAX.
indexfunds, savings, traditional
2081 - 2123 Jonathan Mendonsa I'm going to tell you my mini conclusion and I feel free if there is a guest that knows more about this than I do when they come on the show later they can refer to this and say Jonathan I have some advice for you I'd be fine. But tell me what you think about this. Is this a good plan. So my plan as I start to develop this three to six months of expenses. So I think we're talking you know what three it three to 10 grand somewhere you know somewhere in that range I'm thinking just let's let's say the average American has 3000 or 4000 dollars worth of monthly expenses. Middle class America that meets your needs your mortgage car payment you know whatever else that's where you're at right now. Three grand in bank account would be great maybe three grand in a money market or something that you can easily access and then anything above that and VTSAX.
indexfunds
2123 - 2125 Brad Barrett Yep that sounds reasonable.
2125 - 2150 Jonathan Mendonsa It's very reasonable middle of the road. Nothing aggressive there. Now how about because choose F-I is where give you life optimization strategies how about we upgrade a look that a little bit. So you potentially could be eligible for a Roth IRA. I think the Roth IRA could make the absolute perfect emergency fund because you can withdraw contributions without a penalty and you can set up a Roth IRA in a VTSAX. Brad.
indexfunds, lifeoptimization, roth
2150 - 2152 Brad Barrett Yeah that sounds pretty good.
2152 - 2217 Jonathan Mendonsa So between those categories you should build access three to six months worth of expenses. Pay attention to that little Roth IRA hack because Brad and I have some big plans for kind of creating what we like to call the blueprint and we're going to use that tool many many times so just pay attention to that little nifty trick. Get a Roth IRA account set up fund from an early age take advantage for life's emergencies. We'll come back to that. All right baby step 4 invest 15 percent of household income into Roth IRAs and pretax retirement. Now I'm going to say that for our audience the choose F-I audience. This is where the advice starts crashing down. First of all Dave Ramsey at least in his books and he may have modified it on his online presence he commonly assumes a 12 to 18 percent rate of return. To justify that he recommends that you use his quote endorsed local providers which are you know active fund managers and they're going to put you in these mutual funds that will give you these high rates of return and most of the math equations that he uses either assume an 18 percent rate of return or a 12 percent rate of return. And frankly you just don't see that anymore Brad.
ramsey, roth
2217 - 2218 Brad Barrett Yeah I'm not sure you ever see that.
2218 - 2222 Jonathan Mendonsa I thought OK because I was out of the loop when this was happening but.
2222 - 2227 Brad Barrett That's completely unrealistic. Maybe in the 1980s when interest rates were 18 percent you could.
2228 - 2230 Jonathan Mendonsa Not a book in the year 2000 through 2010.
2230 - 2237 Brad Barrett Now that's crazy. I mean I think as a matter of course we assume maybe 8 percent is what we've been using. So I think we'll go with that.
2237 - 2316 Jonathan Mendonsa OK so I'm good with that too. So that was the year 2000 through 2010. But you know let's just let's throw unrealistic numbers out of there if he wants to hold to it that's fine but we're not using any of those numbers for our math. So let's look at the reality of Dave's plan and let's just look at a couple of case studies so let's take a look at an individual that invest 15 percent of their household income into either Roth or pretax retirement IRAs. So Case 1. So Tom makes 40 grand a year and he invests 15 percent or 6 percent annually into a combination of pretax and post-tax accounts and he does this every year for his working career which is 40 years from the age of 20 to 60. He never gets a raise. And I realize that's unlikely. But he also never fails to contribute. So you know our retirement he's going to have $1.6 million so Tom has done it right. He followed Dave's advice. He's a millionaire. Sounds good right. Maybe a second case. You know Dick decides to go to medical school. Four years of undergrad. He's 18. You know from the year of 18 to 22 and four years of med school and he finishes med school at 26 or to five years of residency finishes at 30 or 31. And so basically it's the guy that does all the extra school and because of that he didn't start investing until his little bit later in life. Does that make sense and now he started at the age of 30 and investing until 60.
ira, medical, roth
2316 - 2317 Brad Barrett Sounds a lot like you actually.
2317 - 2443 Jonathan Mendonsa Yeah yeah a little more modeled after me. So. So but you know this guy can only work for essentially he's only planning on a 30 year working career. And so because he delayed his his life he got a higher income he's making let's just say 100 grand just for easy math. And he invested 15 percent which is $15000 for 30 years. He's investing twice as much but he only is making $1.8 million. So that's one reason I wanted to do that is again one to give you a taste of what opportunity costs looks like so because he had to wait that extra 10 years he had to invest twice as much basically to come out the same as the other guy had a much smaller paycheck had to invest much less. So they're basically coming out even so that is opportunity cost. But even us aside from that the choose FI community is not banking on 30 or 40 year working careers in order to get to retirement. You know we are putting a lot of work in now so that we can so that work can be optional going down the road. Right. And for us 5 5 percent 10 percent 15 percent of our annual income and 50 percent savings rate that is just not going to cut it. If you plan on becoming financially independent in five 10 or 15 years that's really my biggest problem with Dave's market is a person that is going to be working for life. And this is not the 40 year career podcast. This is the choose F-I podcast people in our space we understand the importance of savings rate and this is one of our biggest breaks with Dave Ramsey. We live far beneath our means focusing on building passive income streams through investments real estate and business ventures and I can give a shout out to another podcast here that's in our space. Joshua sheet's from radicle personal finance. In fact I think we're actually going to conference next week where he's going to be there looking forward to that Josh.. He had a podcast and I think it was a year or two back and he aptly pointed out that if you want to experience Dave's level of success don't do what he says do what he did and what did Dave do. He slashed his cost of living he created a space between his cost of living and his income. He built a business from the ground up and then he scaled it to reach millions and that's what we're doing here now. And you can be a part of that.
highincome, landlording, passiveincome, ramsey, savings
2443 - 2497 Brad Barrett Yeah. And I think just to take a step back. Real quick is you know just looking at baby step four 15 percent of your house of a household income. That is really powerful for the people who are those hair is on fire type thing right like that sounds probably like an unrealistic goal for many people. Yeah. And I think for those millions of people this is an aspirational goal. Yeah. And if they can see 15 percent of their income they're not going to be poor when they're 70. Right. And that is huge because how many millions of people have nothing saved up when they're 60 or 70. It's ridiculous. So 10 to 15 percent. That is a very admirable goal but I hate to look at it as just some against some arbitrary dogmatic percentage that makes no sense to me. For me it's what do I need to live a life that I'm comfortable with. Right.
2497 - 2498 Jonathan Mendonsa Yes absolutely.
2499 - 2536 Brad Barrett So this is not I save 15 percent of the top and I spent every other dollar. I mean that would be ridiculous like that. That makes no sense to me theoretically. So for me it's I design the life that I want to live. I spend money on what I value and I save every other dollar. And if the next month there's something that I want to buy that I value I buy it because I have the money and that is a perfectly legitimate reason for me to buy something and I'm completely happy with that. But this gives me the flexibility to do that right. The way that I live which is I don't see some arbitrary percentage I save everything I possibly can.
valuist
2536 - 2553 Jonathan Mendonsa Yeah it's awesome. And you're exactly right. And also I'm glad you said that there's a specific audience that probably I had in mind when I was thinking that through. But there's also millions of people like you said where 15 percent is almost unattainable. And so you start with where you're at and then you figure out how to go from there. So thanks for pointing that out.
2553 - 2570 Brad Barrett Yeah you bet. I mean I think I I admire Dave more than I probably realize frankly is going through going through these baby steps. I think he's doing such a service to millions of people. And we are going after a different audience. Right we're looking for the graduates of Dave Ramsey.
ramsey
2570 - 2640 Jonathan Mendonsa Yes yes absolutely. And I think that's where we're going. We're going to go with this in a minute. I have kind of a jumping off platform at the end here. All right baby step five college funding for children because college is coming. And it's expensive. I don't really have any issue with this. I don't care how you do it you probably do need to prepare for your kids in some way shape or form. I don't necessarily think that you need to put it in specific accounts. I mean you can I'll get Brad's opinion on it but if you build wealth for yourself and your family your kids will benefit from that. So if there are tools available to you to channel that money to certain places but most of the ones that I've heard have too many restrictions on it I'm not. I may do them as it fits the model and I can visualize it. But my bigger issue with college is just be smarter about it. Right now you know 2017 things are changing Don't be the person with a 300 CD collection and no way of listening to it. I mean college is changing the way that people are going to be getting their education is changing don't spend 100 grand on a college education if you don't have to if you can get it for less. And I think it's not so it's not just saving up 100 150. It's figuring out how to be smart about it now I'm not going to go really far into that because we have a whole other episode. But Brad did you have any thoughts.
college, families
2640 - 2688 Brad Barrett Yeah I was just going to say the same thing which is you know I suspect strongly we're going to have multiple episodes on on how to save for college how to hack a college education. Yeah I think you know that's something that we both feel very very strongly about. You know I have two young daughters and in the not too distant future and you know this is something that's that's on our minds. Right. And I guess just if I can talk real quickly about what we do this is something I think about all the time because I don't know the right answer. I've actually joked with Brandon Brandon from the Mad Fientist is that is a good buddy of mine and I admire him to the utmost and you know what he does with figuring out the math of these situations is amazing. So I actually joke with him about coming up with some kind of mad Fientist review of what the best decision is for saving for college. There are definitely ways to hack it. You talk about 529.
529, college
2688 - 2691 Jonathan Mendonsa 529 and the ESA are the two tools that most people talk about.
529
2691 - 2697 Brad Barrett Yeah. And you know we did set up a 529 account for both our our girls.
529
2697 - 2698 Jonathan Mendonsa Doesn't lock you into a state.
2698 - 2771 Brad Barrett It does not. So you are at least as I understand it to you do you do open it up with a particular state. So we have Virginia 529s. But I think as long as they are they check the boxes on being an accredited college an eccentric center you can tap that money for whatever college they go to regardless of the state. But there are limitations and you know also what if my kids don't go to college. Right. Like that's something I've thought about like I don't want to I don't want to be the bozo who oversaved in this 529 and then life intervened and we are locked up with that money and have to pay some onerous penalty yeah you know that makes no sense or what if my kids get scholarships or something like that. So we've kind of split the difference and I'm not sure that this is the right answer quote unquote but it's something that we're reasonably comfortable with so we put a small amount of money in every month whatever it is a 100 bucks or $100 per girl I think per month which is a tiny amount in the scheme of things. But over 18 years it all it'll add up to something decent and it'll pay for a year or two of their college if need be. So that's something I'm comfortable with. I don't feel like saving multiples of that because I'm simply not comfortable with them.
529, college, scholarship
2771 - 2836 Jonathan Mendonsa I'd be on the same page. All right baby step six pay off your home early. This one's you know it's tough. I can see it either way. I think it's the answer is maybe yes slash maybe. I think probably part of that would be what's your interest rate and what's the alternative and what's the cost of doing that. Like Brad said earlier that I really appreciated was we're not we don't have any dogma's we are not dogmatic about anything. We just think it through and we're just hashing out these ideas. I think one of the questions to be specifically was what is your interest rate so you know if you have a 3 percent interest rate. Wow that's pretty good. That's money that you're keeping for free at 3 percent and on top of that it's free. I mean it's taxpayer subsidized money and on top of that it's a platform for you to start itemized and it is the number one thing that allows people to start itemizing their other deductions so if you get rid of your mortgage. Not only do you not deduct the interest which is fine. I don't care about that but it actually makes it harder for you to itemize other things because you have to then get to you know what for a married couple $12000. Right. above the standard go for above the standard deduction so it hurts you in a couple of different ways.
2836 - 2867 Brad Barrett Yeah I have struggled with whether to pay off our mortgage early and in full disclosure right. That's what we're doing here in this podcast is saying the good and the bad and we have vacillated. My wife Laura and I have vacillated between paying a significant amount extra in principle every month to paying a tiny little bit. A hundred dollars a month or $200 and that would have accelerated it eight years off the back end of the mortgage which is pretty cool. So now we pay nothing extra. So I mean we have literally done essentially three different options as I see it.
2867 - 2873 Jonathan Mendonsa What if you had a zero percent mortgage would you still pay it off. I mean because it's debt but it's not cost you anything. Is that a no brainer.
debt
2873 - 2896 Brad Barrett I would not pay at of early in that scenario and you know honestly even at 3 to 4 percent I think we have a three point seventy five percent mortgage rate. I look at it and say OK I mean I'm clearly going to return better than that on investments unless something calamitous happens. So just mathematically it doesn't make sense but also you can look at it again psychologically psychologically. Right that's when we talk about.
mindset
2896 - 2914 Jonathan Mendonsa That's the only case you could make for paying off a zero percent mortgage would be just the psychology of having less in expenses because you're basically saying you know I'm willing to not invest 200 grand or 100 grand or whatever that number is. You know I'm willing to not invest that so I can get this done. There is a real cost to doing that.
2914 - 2949 Brad Barrett And I mean also you know my mortgage my entire mortgage payment for pretty nice four bedroom house in a you know upscale neighborhood in Richmond is I think it's like $1140 or something like that. I mean it's and that's your property. That includes property taxes insurance and their principal. So right so I mean that's not all expense. I mean. Right. You know I'll be paying that same. Eleven hundred dollars. Twenty five years from now it's just in purchasing power what is. Eleven hundred dollars. Thirty years from I mean it's it's going to be peanuts so right. I've definitely thought about that as you know a reason to not pay it off.
insurance, tax
2949 - 2955 Jonathan Mendonsa We'll give you a cutoff at which point you'd say you know what we probably either got to do this or refinance it would it be 6 percent 5 percent.
2955 - 2972 Brad Barrett Yeah I mean that's that's a tough call. I mean I think it depends it depends what the prevailing interest rate is not to and not to give you a copout answer but can you refinance right. Mean if it's three and a half percent is the prevailing do you refinance and pay a couple of thousand bucks in interest rates. I mean in closing costs.
2972 - 2989 Jonathan Mendonsa So I think we're kind of just walk away from this one. I mean it's just you know maybe maybe pay off home early isn't just a blanket statement that you make maybe it's situational and really can be applied I mean it is it's a math problem it's a psychology problem. It's not a it's not a super simple thing to answer. Although there may be a specific answer for everybody.
2989 - 2990 Brad Barrett Agreed.
2990 - 3031 Jonathan Mendonsa All right. So this brings us you know more or less to the end and this is baby step seven and this is probably the most disappointing part of the Dave Ramsey plan. And Dave says build wealth and give that literally is the end of his book and you come through all these steps you've kind of walked to the end and it's not very inspiring. In fact it's it's kind of it's kind of boring. Like for instance you don't need to wait to be on the other side to give. I mean I gave the whole way through my ties and offerings of that sort of thing. I mean you don't need to be a jerk when you're going to these steps if you can do it. You should be doing all those things. But then once you get to the other side your final bullet point just says build wealth and give. I really would like to flesh that out.
ramsey
3031 - 3034 Brad Barrett Yeah I mean this means essentially nothing to me.
3034 - 3075 Jonathan Mendonsa Yeah. So you know give me some sizzle you know. You know who does a great job with sizzle you know sizzle the steak sort of like pyramid schemes. You always know when you found a pyramid scheme when they start telling you about the free cars that you're going to have. And the million dollar lifestyle you're going to you know you're going to have an island you're going to own as soon as you start working with them on your own little business where you can hire five people and they can hire five people and and all the stuff. Well I'm not really talking about that either. But I think we should flesh out what are some of these opportunities and I think we can do a better job than Dave did for whatever reason. I don't know why he just gave up on this one but there are a lot of doors that open up for you once you reach financial independence.
3075 - 3078 Brad Barrett Yeah it definitely seems like Dave have melted in here.
3078 - 3168 Jonathan Mendonsa It totally I think he got tired of writing. So I'm just going to just this is just going to take two or three minutes and we're just going to you know bounce off some ideas for you. So you're financially independent your life cost nothing now your investments which are maybe maybe you have 300 400 thousand dollars in a some sort of retirement account or taxable account. You know that's bringing in thousand dollars $2000 a month something like that your expenses are only 20 you know $25000 a year because you followed all these piece of advice you've got in your cost of living really low. You know what's next for you. And while I'm not going to give you every single little thing that you could possibly do or just take too long I think you should be considering that you do have a lot more options than you used to. And I don't think for me and everybody is a little bit different I don't think for me that I'm ever going to be the guy that Jet sets around the world and has the Lambo out in the driveway and is not to have this opulent crazy lifestyle. I'm very happy as a middle class American. Just the things that we have now and I'm extraordinarily satisfied but I do think that I enjoy working on these smaller projects. I enjoy building something from scratch and I think that just building businesses one at a time and talking about people that share my interests and then working on code projects with them. That's I think it's freedom. I think that's probably where I would be used instead of instead of build wealth and give I think it would have been freedom and that's what we're doing. That's a choice that Brad and I are making every single day. We're trying to figure out what tools and what projects can we invest our time and that will give us more freedom and whatever that is.
3168 - 3174 Brad Barrett Yeah freedom and flexibility right. I mean what's the most finite of resources time.
3174 - 3176 Jonathan Mendonsa Time you're running out of it.
3176 - 3197 Brad Barrett Every single day it ticks away. And you know most people go to their 9-5 and commute 30 minutes each way and that that's difficult. And we obviously understand that you need to do that right. You need to you need to do that but there has to be some end to it. Right like there has to be that pot of gold at the end of the rainbow and that is achieved by saving money.
3197 - 3201 Jonathan Mendonsa Because you were born to do more than pay bills and die.
3201 - 3247 Brad Barrett Yeah. I mean it just it can't be that can't be your life. We get 80 90 years on this rock and we need to enjoy it and we need to maximize it and do what you're passionate about. Right. And obviously you have to work you have to work to get to this financial independence state. But man after that if you make everything in service of getting to your FI number and that doesn't mean depriving yourself along the way but it means just being aware of it. If you can if you can get to FI and then you have decades ahead of yourself you can explore things that you enjoy that you know maybe you didn't even know was available to you. Right. You can connect with people like Jonathan said you can learn new things you can make partnerships with people you would have never thought possible. And that is really powerful. And again it all comes back to freedom.
myfinumber
3247 - 3372 Jonathan Mendonsa So let's say that I'm very close to step seven. Yeah. OK. I'm getting there. For me there's a couple of things that I'm going to do one I reject Dave Ramsey's approach on taking out debt for real estate I have no problem with it. He crashed and burned but there were a lot of other circumstances surrounding that. I feel like there's probably a better way of doing it than he did it. And so I plan on tiptoeing into real estate starting in a couple of businesses so I started two new businesses this year. Now neither of them have made me a single dollar. I think that it's important to point that out. I have not earned a single penny in passive income from my businesses and I am completely ok with that because I plan on growing them and they will. They will return money for me at some point and I am growing them from scratch and it's pretty cool. I mean I'm learning a bunch of new skills it's engaging my brain. I'm planning on starting two more businesses next year so I mean these are different things that I am approaching and enjoying. Also I'm learning new skills like travel hacking. Dave Ramsey hates credit cards. He hates them and you know he's talked to a lot of people were they have ruined their lives. But that doesn't mean that we need to completely throw out credit cards. Credit cards have a very useful place in my life and we're able to use credit cards to allow us to travel the world for free and without spending a single extra dollar to still be extremely frugal and self-controlled. And get five to 10 grand in free travel each year nobody knows about that and you'll never know about that. If you're only listening to Dave Ramsey by actually talking to other people and learning new techniques and actually that was one of the things I learned when I met Brad is just this wonderful world of travel hacking that there are literally hundreds of thousands of people that have figured out a way to travel the world for free. And that's another thing that I'm looking into it of but a lot of fun and I think you all are going to get experience of that. So one of the things that we want to do is we want to one share with you where we've been and where we're going. And two the things that we have discovered the things that we're really good at how we got there what our decision tree was how you can get started if you want to do that and we want to make your life simpler. We want to make your life less expensive and then we want to open up doors for you if you want to try some of the things that we're trying.
debt, househacking, passiveincome, ramsey, talentstack, travelrewards

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