063 - Scott Trench

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5 - 51 Speaker You're listening to choose FI radio the blueprint for financial independence lives here. If you're looking to unlock the secrets to financial independence and early retirement your in the right place, stay tuned to join a community of like minded people who are getting off the hamster wheel and taking control of their lives in the pursuit of financial independence. Choose FI your home. for financial independence online.
51 - 94 Jonathan Mendonsa Hey guys welcome to the ChooseFI radio podcast this episode is going to be awesome. We have Scott Trench with us here today and for those of you that are not aware of the trenchanator he is the vice president of operations over at bigger pockets. He has a new podcast called bigger pockets money. He has a new book set for life and he's also obsessed with personal finance constantly exploring how he can make these concepts by people like Mr. Money Mustache and Joshua Dorking and Brendan Turner. How can he take the foundation that they've laid and make it work for everyone and I think he is someone that is incredibly relatable and he's incredibly good at turning these ideas on a blog into real life examples and helping people grasp these concepts and apply them to their own life and help me with this I have my cohost Brad here with me today. How you doing buddy.
94 - 137 Brad Barrett I'm doing great Jonathan. Yeah this is what I've been looking forward to for a while. We have had the good fortune of meeting Scott both at Fincon and at Camp F.I. recently. I always describe him as like an old soul. He's just a genuinely nice human being. When you talk to him you know he's interested in you. He asked questions. I mean he's only 27 years old and yet he is the V.P. of Operations at bigger pockets. He's well on the path to financial freedom has a net worth in the many hundreds of thousands just because he followed the advice of people like Mr. Money Mustache and he took action. I just can't wait to hear his story and to bring him to the chooseFI audience and so with Scott welcome to the show.
campfi, fincon, networth
137 - 139 Scott Trench Thanks guys. I was really nice intro. I appreciate it.
139 - 168 Jonathan Mendonsa This is an episode that I am incredibly excited about because what you've put together you kind of look at this problem and you say it needs to be simpler. You know when I look at like people like Mr. Money Mustache and what they've done over it bigger pockets like these are guys that are broken down these concepts. But there's a way for me to even streamline this process. And I love your line. Make it work for everyone. I'd love to hear a little bit of your backstory in here. What was it like for you. And at what point in your life did you stumble onto the two respective communities the fi community and the real estate community.
backstory
168 - 219 Scott Trench Yeah sure. So I went to school in Nashville Tennessee and my parents paid for most of my college education. So I was able to graduate debt free with about 3000 dollars to my name which is a great Headstart actually. After college I went to Europe and spent the you know I think I had like eight thousand dollars spent like five thousand dollars backpacking around Europe with a couple of buddies before starting my full time job that I got out of college. So that was my starting point and had a wonderful time meeting lots of friends in school going around Europe. You know I had a lot of internships did well all that kind of stuff I get into my first full time job at a Fortune 500 company and in 2012 it was the meanest company in America to work for. Subjectively that was objectively. So if you want to Google a company where you can figure it out if you just research at Google meanest company I work for 2012. That was where I started my career. And.
career, college
219 - 223 Jonathan Mendonsa I'm totally going to google that and put it in the shownotes.
223 - 313 Scott Trench Absolutely. But the blessing that I had from have from being in that environment was it made me realize hey I can't do this for the next 20 30 40 years that the traditional length of a career. And there's two parts to this one. I realized that gradually over the first few months. it wasn't like it just hit me one day. As the work became you know there wasn't enough work there wasn't enough opportunity for me to really kind of do all the things I wanted to do. So I would finish my work in a few hours and then I would be like I'm getting paid to be here so I'm going to go and learn how to do my job better and better and better. I became an Excel guru by taking courses in excel at work to continue to streamline my process. And then I wanted to learn about finance I was a financial analyst. So I was like OK I'm going to read a lot of different blogs and things on finance how to be a better financial analyst. And in the course of that search at some point I must've stumbled across the concept of personal finance. There's a natural overlap between if you're interested in corporate finance and you know personal finance. I don't know exactly when it was but I began discovering some of these concepts for personal finance. And I think the first time that I really understood the concept of financial freedom and financial independence was on the radical personal finance podcast. The first guest on that podcast ever was a guy named Mr. Money Mustache. And I remember that kind of changing my mindset and that I began reading his blog. Sometimes at work and over the course of that three to six month period after starting that job that's when I really became enamored with the concept of financial independence there.
career, mindset
313 - 321 Jonathan Mendonsa So Scott I know that you use that word financial freedom. Is there any significant difference in your mind between financial freedom and financial independence.
321 - 353 Scott Trench No I think it's all one in the same. The problem is I wrote a book on the subject so my editor maybe you like you're going to choose one or the other. I was always financial freedom now and that's just my default because I've been trained to do that. I think there's no difference between the terms I like financial freedom better than financial uh not necessarily financial independence but I like it better than retirement just because sometimes people dismiss the idea of retirement. But financial freedom is not about necessarily retiring and just the option to do whatever you want to do.
353 - 414 Jonathan Mendonsa Makes total sense. I do have a follow up on that. So one of the things that you do so well is you bridge that gap between the real estate world and the financial independence world there's very few other influencers in our space that are doing that as well as you I would say maybe coach Carson is another one. And to me that is such an obvious parallel storyline. I mean I remember looking at the financial independence community from the outside a year or two ago. And at the same time so I would spend my time listening to the bigger pockets podcast that would be like on the way to work. And then when I got home and on the weekends and at night I would be reading or listening to either the mad fientist or reading Mr. Money Mustache. You know JL Collins. And people in that particular space. But there was never any cross communication and it seems so obvious that these two communities are linked arm in arm. If it's framed the right way but nobody was speaking that message nobody was tailoring their message to that idea to that overlap until I found your book set for life.
414 - 488 Scott Trench Well I think there's four things that actually are the four levers behind personal finance that are as I define them. One is your savings rate right. One is your investment approach. One is your earned income approach and then the fourth is going to be your asset creation approach. You know you can define that as business and there's gonna to be some overlap between asset creation and income generation of course but there's really those four areas are the things that people can do. Now some segments of this community of wealth building will focus in on just one of these areas and they pigeonhole themselves. You know it's Orthodox for example for some people to be like oh it's all about savings. The only way to reach fire is to save as much as possible. Have a couple of hacks like you know travel hacking or whatever. And then invest in index funds. And that's how you achieve fire. And there's really no other way. Well there's a ton of different ways and they all work well I believe. I certainly agree with those folks that the foundation of this plan is that 50 percent savings rate. You know what that does for you is as you begin accumulating assets it begins to enable you to take chances and pursue opportunities in these other areas for income generation more creative investing that can produce better returns and then the creation of assets from scratch or the acquisition of businesses.
indexfunds, savings, travelrewards
488 - 538 Brad Barrett Yes Scott I completely agree. It's certainly shortsighted if people portray that as the only path the save half your money and put it in index funds and that's it. I mean clearly there are many different levers and I like your your list of four there. I just want to slow down for a quick second. When you were describing your first couple of months on the job what stuck out to me was lifelong learning. You talked about hey I got great at Excel. I wanted to be the best financial analyst so I took these courses that strikes me based on my experience as unusual in that many people don't go out of their way to be that lifelong learner. And I think it's so essential. I'm curious where you picked that up. Have you always been someone who tries to learn various different skills. How has that impacted your life favorably.
indexfunds
538 - 627 Scott Trench So I thought about this other day and I think what it comes down to is I have very high expectations from life and some people do not have high expectations from life some people are like I'm going to work this job for the next forty years and you know do this and then I'll retire with a modest amount of wealth and that'll be it you know. But I think that us in the financial independence community you're not really going to be interested in financial independence in the first place if you're expecting to get by, to just get by in life. You have to expect to want more. And I think that when I was when I was starting my job I saw as a great opportunity I hustled to get that job. I networked with people. You know I had an internship at the company a year before and I networked with the finance team. I wanted to be in a finance team as one of the few people to get a job in the corporate finance department without an MBA. And I expected for that effort to be my effort to produce some rapid rewards and opportunities for me. And when I began to not materialize I realized that no matter how much effort I was putting in more work I did the more work I was given. And when I had good ideas I was really not able to really get them to have attention from the company if that makes sense. So yes I was attempting at all times. I think perhaps unusually to provide more value to the company with every passing day to the best of my ability. And when that began to cease being rewarded, when my expectations for better than average results from better than average effort were not being met. That was when I began to get disillusioned I think and that accelerated my yearning for financial freedom.
mindset
627 - 634 Brad Barrett And so that disillusionment that set in fairly quickly right within the first handful of months of being at this Fortune 500 company.
634 - 653 Scott Trench Yes I discovered I think I think that I was completely on board with the concept of financial independence. I think I started in August and I was completely on board by January. In the meantime I made my one of my big financial mistakes which was buying a brand new car. However it was a Toyota Corolla brand new toyota Corolla isn't so bad. But that was my.
653 - 712 Jonathan Mendonsa You're wasting the hot seat. Questions man. Your burning through content here Yes that's great. You know one of the things so I listen to you at the camp FI we were at recently and one of the points that you made that was so powerful to me was your definition of luck and I have to paraphrase it. I didn't write down the exact quote but I came away with luck is the intersection of preparation and opportunity. What I would love to hear you talk about for a few minutes is you're now the vice president of operations at bigger pockets a company which by any standard is blowing up mean it's a massive company. It started with one guy trying to build something out of his living room for years. You know you and the team there have kind of set it on this exponential growth which is fascinating. But I'm curious how do you go from someone that is just miserable in the meanest job in the country to someone that is thriving as an employee in someone else's business.
Jonathan_Catchphrases, campfi
712 - 914 Scott Trench Yes. Describe to you a chain of good luck that happened over the course of this period from let's call it January 2014 until July 2014. So at this point I was all on board with financial dependence and while I love Mr. Money Mustache was the guy who got me going on it saving up 25 k was my reality for the first year. That was all I was going to be able to do. You know I was ubering after work I started trying these little side businesses that failed one by one I began accumulating my savings and I was like How do I invest these more efficiently. Index fund investing is great but if I'm expect 10 percent returns I'm going to be here for 15 more years even if I'm doing my best here. So I need to start changing some things. So I began meeting people for lunch all the time. I explored the concept of network marketing multilevel marketing which I don't know. I considered that with like 5 people who did that and I just didn't get good vibes from any of the people I met. And so I'm really glad I stayed away from that. I'm glad I tried my business I tutored math and I just talked about investing in real estate all the time every chance I got. Now the first stroke of really good luck came to me when I was walking this dog. And the reason I was walking the dog is my friend was she had bad knees and she lived in downtown Denver and she had the cutest Australian sheep dog. Now that's a terrible thing for an animal because it's cooped up in this state so I would go run this dog and I would attempt to pick up girls at the local park and this was unsuccessful every time I was very unlucky in that respect however I did take a break and sit down on a park bench with this guy and we start talking stocks and entrepreneurship and he's like 65 retired hanging out and so I pick up this old dude at the park and he invites me to his mastermind meeting which is every Thursday morning or once a month on Thursday mornings at 7 o'clock in the morning. That was a turning point in my life when I attended that first master meeting I was like These guys are good. One guy owned ten properties in Denver and was flipping flipped five or six houses a year. One guy owned a real estate firm that did probably over a hundred million dollars in real estate transactions. One guy was a property manager. One guy was a landscaper was starting a landscape company that ended up not working out and he went on to be successful with a venture a few years later. But these guys were smart guys and here I am this 22 23 year old kid not knowing anything and they're allowing me to Tagalog and learn from them. So I take every single one of these guys out to lunch. I'm taking one of them out to lunch it's actually the guy who owned that real estate brokerage and he works in the same coworking space as a guy named Josh Dorking. Now Josh Dorking is the founder of bigger pockets and at the time it was him and another guy named Brandon Turner those were the only two employees at the company I had been listening to the bigger pockets podcast. I was a huge fan of the podcast I'm sure many of your listeners are huge fans of you guys would be like them running into one of you just randomly while networking and like suppose that you'd been following the choose FI podcasts for months had been following the advice had been networking with people who were ahead of you and ran into what if that be like oh my god. I'm doing exactly what you told me to do. Josh you're my hero. You changed my life. My perspective is is different. I love what you do. You know can I come work for you. Can I come help you out in some way for free on the weekends or after work. I just want to meet investors and lerp get more knowledge. Josh blows me out if he says go away kid what are you doing.
savings, stocks
914 - 916 Jonathan Mendonsa I have a feeling he literally did that.
916 - 1040 Scott Trench Literally what happened. He's like You know I'm busy and I hate it when people come in who know me and to disrupt my work. And it was like oh come on and I followed up like six ok maybe that's exaggerated. But I followed up like six more times basically saying hey can I get you can I buy you lunch can I take you out to a beer. Can I just learn from you whatever. And finally he invites me in and it turns out that invite was actually a job interview. And I sit down and there it is there's Josh and he's asked me questions if I want to apply for a job as an operations guy at the company. We get on the Skype we pull up Brandon who is also a hero of mine and these guys are interviewing me and I'm like wow what's going on here. And you know they give me a couple of tasks to do I complete them and I get the job. And at the time it was kind of a little risky because I went from a very stable Fortune 500 company even if it was a mean company to a startup with two employees. I had no idea what the financials were I had no idea what the. You know how the company was doing all I knew is that it was changing my life and that I thought it would you know. From what I could gather it was changing hundreds or thousands or hundreds of thousands of other people's lives as well. And so that's how I got the job at bigger pockets. And so you can see it there's a stream of luck that connected to all of these events there yet you know if I hadn't been so obsessed with finance I would never had that conversation with the guy in the first place. If I hadn't been serious about my goal to achieve that I wouldn't got up at 6 o'clock in the morning biked over in the cold weather to this meeting they used to say that I looked like an airline pilot because I would wear my ski helmet because I was so cold on my bike to these meetings at seven o'clock in the morning and met with all these guys and then I wouldn't have taken each one out to lunch. And I'm really frugal spending money to people out to lunch and to learn from them and then met Josh Dorkin right. And that was the stream of luck and preparation that got me to get a job at a company that I was really a big fan of and believed in. And then of course I've continued to try to learn and grow and we've had a lot of opportunities and luckily more and more people seem to like what bigger pockets is about and come to the site. And it's grown and gone from there.
1040 - 1100 Brad Barrett Scott I love that intersection of luck and preparation there and I really hope the audience stops and picks up some of the important mental skills that you just talked about which are having high expectations from life. While most people don't. Having this positive outlook always looking for opportunities taking those coffees taking those lunches. When we met a camp fi you said every single person that emails you about hey let's go out for coffee or let's go for lunch. You take those meetings. That's just such a cool outlook on life and I really want to commend you on it and I also want to point that out to the audience certainly. I also just want to real quickly ask you about that first meeting. Well you know when you're there with the dog sitting on the park bench with this 65 year old guy you're a 22 year old kid as you described to us. What do you think occurred in that meeting that led him to invite just some random 22 year old kid with a borrowed dog to this meeting of high powered investors.
campfi
1100 - 1159 Scott Trench I think it's all networking. I was genuinely interested in investing. I was generally at least with a conversation started with stock investing. At the time I was still new to financial independence and was interested in stock picking. You know I was a very unsuccessful stock picker myself. And so we were talking about that for a while but I was more interested in entrepreneurship. I was just interested in the concept of wealth generation business building. How did all that kind of stuff. And so we just talked for an hour about this stuff. And I think I was just genuinely interested in it and was delighted to find a guy that had experience doing all the things that I wanted to do later in life. I think that was why he invited me there. And I think that's the point if you are obsessed with something if you love something you're passionate about something if you want something badly you're going to learn about it you don't think about it a lot. You can talk to other people a lot about it and as you get to do that you're going to find serendipitously maybe people that share your interests and understand when it's something that you want to do.
stocks
1159 - 1238 Jonathan Mendonsa You know we could probably just latch onto this one segment and spend all of our time here just talking about the value of networking from a good place not in a swarmy type of. What can I get out of you how can I close the deal. But what I loved about your story is you always lead with how can I help you. You know that is how you're going and you go to Joshy you say I love what you've done you've had an impact on my life. How can I help you. How can I exchange my time on the weekends in any way help you with what you're working on and the other half of that is you've latched onto this from the very beginning and I think for many of us it takes many many years to realize this but the most valuable thing is not a W-2 paycheck. I think all of us get latched on to having that safety and security but you can tell from where you are putting your time that for you it was accumulating knowledge accumulating information and partnering with people that could get you onto this Fastlane to that information and then assimilating that into your life actually taking action with it. I think that information you can get paralysis analysis where you just sit on everything but I think you're as we go through your story I think what we'll see over and over again is it's those three or four actionable tips you go in with how can I help you realize that the most valuable thing is actually this information and then that extra step you actually take action with the stuff time and time again.
1238 - 1279 Scott Trench Well I appreciate it yeah. I think that's a pretty good summary of how to increase the odds of success. And we talked about the four areas of finance right. Saving money earning more income investing and building assets. But the earning more income and the creation of assets they are going to be reliant on opportunity, things that are outside of your control. I think those things don't guarantee success. They increase your odds of success and the more you do them the more you increase your odds. the harder you work the luckier you get. the more you prepare the more opportunities that will present themselves to you. It's a numbers game. It's like sales. you know you never know how many times you going to sell something if you make a hundred cold calls. But you know if you make 100 cold cause you're going to sell more than if you make 10.
savings
1279 - 1310 Jonathan Mendonsa SCOTT I think your walkthrough of your story up to this point sets the framework for somebody that is positioning themselves to obtain good information from reliable sources. And then as we've discussed you have to take action with it. And so that is essentially that's the premise for the book that Irro set for life. That is exactly what you've done you've tried to take these information from these different influencers and distill it down to something that anybody can access. I know that in your book you describe the three stages of wealth creation. I'd love to hear you unpack that for us.
1310 - 1473 Scott Trench Yes so. The first and I'll go through my story as I described it right so I told you about meeting this guy and the transition over to bigger pockets in July of 2014 well throughout that period from August to about July August 2013 to July 2014. I'd been saving a lot of money by packing lunches. All those things that Mr. Money Mustache preaches. It gave me the confidence to do a couple of things. One we had an employee stock purchase program which allowed me to buy stock at a discount. Other people couldn't buy the stock at a discount because they couldn't live for three or four months without a paycheck. While you set aside this money and then they would basically set aside money into this account at the end of the quarter. They'd buy the stock and you get this gain. And I remember being so baffled that other people would not take a 15 percent employee discount on stock and just realize an immediate gain. But I could do that because I had savings I cash set aside set aside the low expense rate that allowed me to do that and that allowed me to stockpile my cash throughout the first two quarters of twenty 14. So you know I'm I'm coming out in June July of 2014 with twenty five thousand dollars in savings when my peers who maybe made more than me were unable to save even a fraction of that. And that was the position from which I began to kind of seek some opportunities. Now my interest in bigger pockets at first actually wasn't necessarily that I wanted to become a real estate investor. I was more interested in continuing to increase my savings rate. I was so ingrained in the mustache approach and still am that I wasn't really even thinking too hard about building a real estate portfolio. I was thinking how do I reduce my housing expenses. And the best way I thought to do that was from an article by Mr. Brandon Turner here at bigger pockets which is called How to hack your housing and get paid to live for free. And he published that in late 2013 and I stumbled across it in early 2014. That was when the light bulb went off my head. That's why I'm saving I'm saving so I can buy a house hack. And oh by the way buying this house hack and the way this house acts for me I bought this place for 240000 dollars I put down twelve thousand dollars. I put about eight thousand dollars into it and this is all at the end of 2014. So November 2014 is when I actually closed in the property. I fixed it up over the course of three or four months and when I was finished I had a tenant living the other side for eleven hundred one thousand one hundred fifty dollars and a roommate in my side for five hundred fifty dollars for a total of seventeen hundred dollars in rent and 15 50 was my principle interest taxes insurance and mortgage insurance premium. And I did all the work myself and fixed it up. That was a huge savings. I'd eliminated my housing expense and I was in within biking distance of my new job which was bigger pockets at that time.
househacking, housing, insurance, savings, stocks
1473 - 1502 Jonathan Mendonsa So what strikes me is everything you've said up to this point is still core to the FI message and it's that wealth creation begins with frugality. I love that you don't limit yourself to frugality but you start there. And when you're looking at your expenses on a pie chart it becomes very obvious that your main expense on that pie chart is your cost of living your rent your mortgage. So basically what you did is once you analyzed that you were then able to come up with a plan to crush that particular aspect of the pie chart.
frugality
1502 - 1622 Scott Trench Yeah you know I was thinking about it as I was a financial analyst and I was getting pretty good at financial. Being a financial analyst because I was putting in so much time trying to get better at my job I was like OK I look at this and you know no one's talking about housing here. They're talking about packing a lunch. That's great. I'm packing to lunch they're talking about you know I know I spent a little too much money on beer. I'm not giving that up. How am I actually going to achieve a high savings rate. It's got to be through housing. And so that was why I went into like real estate as I can buy real estate maybe I can work hard and generate passive income to pay for my housing. I was unable to put it together that a house hack was the right idea the right way to go about things until I read that article and how it explained to me. But once it was explained to me it became super obvious. And by the way if you look at that pie chart that we were talking about if you're trying to visualize this 33 percent one third is housing 17 percent, The next chunk is transportation 17 plus 33 is 50. 50 percent of American average American household spending is in just those two categories just those two. So by House hacking close to work I lopped off half of my expenses. I was able to spend whatever I wanted in the other areas of life and still achieve a high savings rate well over 50 percent. Once I had done that and that was the catalyst that propelled me forward. Now at the same time I was doing this because I was spending so little and my lifestyle cost so little and I had a large amount of savings. I did feel a confidence also to take that chance on the startup that I believed in which has bigger pockets. So I had transitioned the job in July of 2014 and I closed the property in November of 2014. So those things are happening fairly simultaneously. I was in the middle of offering on the property. I was in the middle of offering on properties right when I transitioned jobs and then that property happened to come along a few months later. So between those two things you know that was what set the stage for really a acceleration towards FI after that.
househacking, housing, passiveincome, savings
1622 - 1663 Brad Barrett Scott You kind of nonchalantly there said Oh I read this article and it changed my life. And I started taking action. That's a pretty remarkable thing when you think about it. Lot of people. Give yourself some kind of like a lot of people consume tons of content and don't take action. I've found what sets people apart who are successful in life and who aren't are. Are you doing things are you getting on that couch and taking action and not just consuming consuming consuming. OK. You had this lightning bolt moment about this house hack that Brandon Turner wrote How quickly did you actually say alright. This is what's happening. I'm making moves right now.
househacking
1663 - 1779 Scott Trench Oh I think it was immediate. I don't remember what date it was but all throughout that first and second quarter of 2014. That was when I began meeting with people like this old guy at the park and going to a networking and and taking people out to lunch and all that kind of stuff. Like as soon as I had that concept in my head I began learning how to do it. I was not financially in a position to buy a house at that point I did not have a strong credit history. I did not have enough cash saved up. I had like four or five thousand dollars in cash in March of 2000 and 14 because all of my money was tied up at this employee stock purchase plan that I was getting. You know I was set to get this huge wave in April when the quarter ended. I was just not in a position to do it. But I was in a position to learn and get myself really good odds of success. And I was able because of that article to realize hey I'm not really buying a house I'm buying an investment property. And as a result of house hacking I will become a real estate investor. And so I might as well put myself in position to have the greatest odds of success possible by learning as much as I can about how to make it how to choose a property in a great location that might appreciate how to manage tenants how to find tenants how to fix repairs how to how to do things myself who to call when I have an emergency. All that kind of stuff was that were the things that I was doing. Over the course of that year the reason I was able to take action if that article wasn't really because like oh I was so bold and adventurous it was because I've been listening to that podcast for months. I've listened to things like content like this that existed at the time for months and because of that my reality, The people I surrounded myself with in my head, to and from work at the gym they were all telling me this is normal this is the thing to do. It was the people at work that were doing the abnormal things we didn't talk much about money and because the people surrounding myself with even though they were they didn't know me and they were talking to me through podcasts and things like that those are the people that I identify with and was able to take action from. And those are the people that I eventually began associating with in real life.
ESPP, househacking
1779 - 1827 Jonathan Mendonsa That's exactly what I've seen as well. The difference between just accumulating information and taking action is immersing yourself in the content and not just reading it but finding yourself in a community of like minded people that are pursuing common goals and you can certainly get that by listening to a podcast to and from work every single day following up with information from various articles and blogs and I think that next aspect of taking it to real life taking at least to social media where you're able to communicate back and forth with people and they're able to show you what they're doing and how to improve that message to your particular situation. Basically taking advantage of the Jim Rhone quote that says you're the average of the five people that you spend the most time with and the amazing thing about the communities the respective communities that we're talking about is that those five people no longer need to be in the same zip code.
1827 - 1915 Scott Trench Yep. A good example of how this helped me a lot was I was feeling really bad around this time about my Toyota Corolla purchase because it was brand new 2014. Toyota Corolla that I bought in late 2013 that's when they released the new models. Friends and family thought that was a great idea. Such a good and economical investment. I read an article I think what Mr. Money Mustache again and he was like when you buy a new car you've got like 20 years of inventory and that's a really bad way to run a business is inefficient you know. I wouldn't print 20 years worth of copies of set for life and call that a good business move and then sell them to Endal them over the next 20 years right. It's just very uncertain. It's you know those kinds of things. But my friends and family do not understand these concepts. They thought I was crazy for even questioning the validity of buying a Toyota Corolla as a smart economical choice. But I remember going onto the Mr. Money Mustache forums and posing this question and getting a lively debate from very smart people that were farther along in the financial journey than me and that had varying opinions and that I think is one of the keys to all of this is having smart opinions going to somebody who's smart in the field that you're interested in and hearing disagreements on how to go about things. Once you can hear those disagreements and acknowledge both sides as as smart and having valid points that's when you begin to be able to make strong decisions. So yes it's a real life even if it is not even if it's real life is the forums in a community they respect and get good opinions and be able to recognize good opinions from both sides.
families
1915 - 1958 Jonathan Mendonsa Yeah absolutely. So I guess the place to take this next is to actually hear you talk about this framework. You've built I mean so let's even move this away from your story. Let's set the stage by saying that the content that's in your book. You've lived this out. I mean I don't know if people recognize the math on this but it's the beginning of 2018. We just said that your journey started in 2014. So in less than five years you are at or now past the point of FI. So the principles that you're talking in the book we know the work if you implement them. I'm curious. We don't have time. I would just read the book live on the show but I don't think that's going to add as much value for people in this particular conversation. What is the general framework that you would introduce someone to if they want to be set for life and do it in a period less than ten years.
1958 - 2063 Scott Trench Sure. You know I wrote the book for someone who is starting with little to nothing who has a median income and is attempting to aggressively do exactly what you just said move toward fi within a period of around ten years hopefully less well the first thing he got to do is accept. You have no assets and you have no time. So starting a business after work people have done it. You will see entrepreneurs who have done it. If you are an entrepreneur and are going to start a business and quit your job with less than one year's savings my books not for you. There are books out there for you and there's approaches out there for you and you may be successful and you may get rich very quickly. But the fact of the matter is most people are not going to have the skill set the desire or the resources to pull off the creation of a significant amount of additional income if they're working a full time job already that pays around the median income. So you have to start with saving once you start saving two things begin to happen. And I say get up to a 50 percent savings rate. What happens if you get a 50 percent savings rate let's say you bring home fifty thousand dollars after tax for easy math and that's a little above the median in terms of after tax income. If you say 50 percent you save twenty five thousand dollars per year. The other thing is you're spending twenty five thousand dollars per year. So that means that you've accumulated this what I call a year of financial runway after one year. Now the reason you're able to accumulate so much runway is a factor of your savings rate in two ways. One it reduces the amount that you spend each month allowing you to accumulate more cash. And two it reduces the amount of runway you need out of cash and you have accumulated to support your lifestyle. For example if you spent four thousand dollars per month you'd spend forty eight thousand dollars per year and save two grand in a year. That's half a month. of financial runway.
midincome, savings, tax
2063 - 2090 Jonathan Mendonsa So if I follow what you're saying correctly basically the goal is to get that first 50000 dollar a year job you can tweak that at the margins. But if we can get that first 50000 dollar year job and we save 50 percent of that very quickly we're going to get up to 25000 now. You actually roll out for someone that's saying well that's not possible. I can't do that. You roll out some strategies for basically how to make that a reality. And it gets a lot easier if you don't have to pay for housing or transportation.
housing
2090 - 2181 Scott Trench Exactly yes that's exactly right. You have to figure out how to do it and getting to that median income. Unfortunately in my opinion is the starting point for the journey to F.I. if you're not able to command a median income to do what you gotta do to go through the process of you know apprenticeship college whatever it is you need to do to get to that median income because it's going to be very hard to achieve a high savings rate basically anywhere in the country at a significantly lower rate than that. So it needs to be. I think that has to be a central focus. Once you're there though yes the biggest expenses in your life are housing transportation food pensions health care. And then there's this 20 percent chunk at the pie chart. One fifth that is entertainment clothing apparel accessories others all that kind of stuff all the fun stuff in your life is that 20 percent and you're not going to achieve a 50 percent savings rate and you're going to hate your life if you attempt to focus on cutting out that 20 percent chunk. That's all the good times right. So we focus instead on how do I reduce my housing expense. However you get a roommates you know move to a house hack if you can maybe it doesn't have to happen overnight. Maybe it happens over the course of a year or two that you approach this point where you can eliminate or drastically reduce your housing expense and then try to be close to work. And if you do those two things you're going to make a huge dent in your housing and transportation expense if you're smart about what you eat, and healthy, and make reasonable food from reasonable grocery stores are going to be pretty good on the food budget you can still go out for wings with your buddies. That's what I like to do. And I don't regret it. Those fun things in life the things you enjoy can still happen while you achieve that 50 percent savings rate.
college, health, househacking, housing, pensions, savings
2182 - 2210 Brad Barrett SCOTT I like how you do not focus too much actually on as you say the fun stuff there is that tendency to look at it from a deprivation point of view. And when you start taking all the fun aspects out of your life this can become a chore whereas you're saying just be smart with the big stuff. Be smart with the housing the transportation the food. So I love that perspective but I'm curious where 401k and other retirement contributions come into this if at all.
401k, housing
2210 - 2347 Scott Trench I am not I was not when I was doing this very interested in 401k retirement contributions I contributed to a Roth IRA and then I withdrew all of my contributions in order to purchase my first house hack. So for me in this stage if you are super aggressive about achieving financial independence and you're committed to giving it as good an effort as you possibly can and achieving it in around 10 years and you're starting young then the wealth that's in retirement accounts, not being able to access it penalty free is a big deal. Even a Roth IRA like I had where you can withdraw early not being able to access the gains early is a big deal because that's the period in your life, if you're setting going about things the way I was where opportunities will begin to present themselves. And that's where you need to be able to access that cash in a liquid form in order to pursue those opportunities. The ability to house hack for example that you know we can talk about this in a minute. But the ROI is literally 100 percent to 200 percent return on investment within the first couple of years. And I'll explain why that is why the math works on that. Even in an average scenarios you know there's just not a way to do that with retirement accounts. There's not a way to fund your lifestyle while you pursue a business opportunity or take a chance on a sales job or a startup that exists in retirement accounts. One of the things I think that happens to many people in this country. They get these jobs these you know middle class jobs at corporations and then they go about and over the course of you know five 10 years they ramp up to a salary of 75 80 maybe even 100 k. But almost all of their wealth is trapped in two places which is their home equity their mortgage payment and their retirement accounts. They have very little less than a year of liquidity outside of those two places and that pigeonholes them into those jobs and delays their financial freedom. They have to go they have to go about it through that rigid formula of save 50 percent of my income and invest in index funds because they have no other choice because they have no other wealth with which to deploy and take and take chances. And so the whole point of this is to expose yourself to opportunity, prepare yourself for that possibility of getting lucky. Consistently educate and be able to take advantage of those when they pop up. So that's why I don't use retirement accounts.
401k, househacking, indexfunds, ira, roth
2347 - 2431 Jonathan Mendonsa That is so controversial. And I love it. Thank you for committing to that and Brad that I'm glad that you slow down on that because we were I was just going to bypass that completely. And I think that that is something that someone is going to have to tease through. But I think at least with the scenario that you're laying out if you're fixated on that plan if you have a plan then this could work for you I mean the math is the math when we say it's just the function of the math you need to be very clear on what the pros and the cons are of the plan that you're laying out. But this is doable. I've read through this book and this is definitely a doable plan. There's a couple things that strike me. I'm thinking about all the reasons that somebody would start listening to this and then bail on your on your ideas here and what might be. You know why don't make 50000 dollars a year. This isn't written for me and in my mind it's always about solving the problem. And to me this is doable. Making it to a 50000 dollar salary is doable but it's the same problem as everything else you need to figure out. All right well how do I make 50. How can I position myself to be in a situation to earn that income. And then from there. Scott's not asking you to save 250000 dollars or reached twenty five your annual expenses he says the first goal is save twenty five thousand dollars. That to me seems very doable. That is low hanging fruit and it's self-fulfilling in that once you get to the point where you're able to save up 25 k you say I can do this. I can do anything. And to me that that's really impressive. I think it kind of sets us up for the next stage in this problem right Scott.
2431 - 2485 Scott Trench Absolutely. Alright want to throw something out there right now. Two weeks ago here in 2018 I decided that this year I am going to begin contributing to retirement accounts. And the reason why I'm doing that is because my company allows me to take a match and the other part of it is I now have the passive income I need and the ability to accumulate large amounts of liquidity every year I'm happy with my job and I don't need that money right now. And that's why I'm beginning to put it away into these retirement accounts and take the tax advantages because I have more cash than ideas of how to efficiently invest it more creatively and because my job is getting a little bit more busy here bigger pockets which I love. I have less time to pursue these creative investments so I am changing my tune on a retirement accounts. Now at the time though and I do not regret and I would have done the same thing again I did not contribute to them during those initial years of wealth building.
passiveincome
2485 - 2500 Jonathan Mendonsa But this is not choose FI recommending that you not fill up your time accounts. Rather this is if you have a plan that makes sense that you have tested and bounced off other people. That's different than drifting through life and not taking action on anything.
2500 - 2517 Scott Trench Yes exactly. Yes if you don't have a plan might as well invest for retirement accounts take the tax advantage. If you do have a plan you can be a smart person and a reasonable person and not invest in retirement accounts because you have a way to use that money to pursue opportunities that you think will advance your position far faster.
tax
2517 - 2520 Jonathan Mendonsa Alright all disclaimers have been put in place. What's stage two.
2520 - 2629 Scott Trench All right. Stage Two. That's where the income production in-house hacking comes in. So let's talk with House hacking first we talked about how it's a 33 percent of your largest expense. I briefly went through my first house hack. Now let's talk about return on investment as I teased earlier. When you buy a real estate let's say you have a hundred thousand dollars and you buy a 100000 dollar piece of real estate. All right. And that property goes up five thousand dollars five percent over a year or two. You've made a 5 percent return. Now let's say you buy the same piece of real estate with twenty thousand dollars and have an 80 thousand dollar loan and that property goes up five thousand dollars or five percent every year. You've now made a what is at five times five. Right. You made a 25 percent return. That works because you have five thousand dollars return on your 20000 dollar investment. You know I house hacked and I put down five per cent which is twelve thousand dollars on a 240 thousand dollar piece of real estate. Now if it let's go back to the 100000. Example if that's five thousand dollars on a hundred thousand dollar property and it appreciates five thousand dollars. That's a 100 percent return on investment. Yes you are leveraged which there's risk and I'll get to that in a moment. But that kind of average appreciation three and a half percent per year is going to produce 80 percent returns for someone that puts down 5 percent using an owner occupant real estate loan which you can do when you're buying a property you're going to live in. You're also paying down the mortgage which compounds your return and hopefully you're paying less like I was in rent in order to live it eradicated by rent expense. So that was 600 bucks a month or seventy two hundred dollars a year. I'm also putting that cash flow in the form of rent savings into my return on investment. You're talking about a 100 to 200 percent ROI easy in an average appreciation year.
househacking, savings
2629 - 2652 Jonathan Mendonsa Scott I love that. And also I know that you've taken the time to document the risk that goes along with this and how you mitigate that risk. And in my mind as you're saying this if your model for investment relies on appreciation leverage is a double sided blade that can cut both ways. I would love to hear you talk a little about the risk of using leverage and relying on appreciation as opposed to cash flow.
2652 - 2793 Scott Trench Sure many people out there will tell you that buying a home is a good investment. So I suppose now that we're not house hacking suppose I didn't buy that duplex as a house hack. Suppose I bought it as a single family home. So I put down the same thing. Twelve thousand dollars. And I buy a 240 thousand dollar property and I pay 1550 a month in my mortgage. This is the position from which people are at great risk. They are highly leveraged and have no hope of paying down that mortgage. right? If that property goes down. They're underwater and they have to pay. And it doesn't it doesn't matter. They have no help. They're going to get with my property. Let's suppose the market had gone down. Let's say the property has reduced in price from 240 to 200. And I have a loan for 235. By the way there are expenses that go along with buying a property and getting a mortgage. And those do deflate some of the returns that I'm talking about in that first year especially when there's transaction costs that go along with this. So model those things in but you're still talking about a 100 percent to 200 percent return if you're able to do some of the things I'm going to talk about in a second here. Now I in my duplex had tenants paying down the mortgage on the other side and a roommate on my side. Even if rents had fallen let's say that there was a 30 percent decrease in rents, a huge rental collapse in the Denver market, and rents go from 11 50 to 800. Well now I'm getting eight hundred from the other side and 400 from my side that's twelve hundred dollars and I'm paying 350 to continue living. I'm still paying less money in a regular month than my roommate is and I'm still paying less money than I would if I were to live in the other place. That's called risk reduction. even though I'm underwater even if the price falls. I'm still able to live much more efficiently. That's how I perceive the use of leverage as a good way to enter into real estate even if the market is going to collapse. Now, that said, one of the ways that this works is if you are happy to continue living in that property for as long as you need to. So if your plan is I'm going to buy his property and move out after a year and keep it as a rental property and things going to be la di Da di da that can happen. That's happened for me but I am not so naive as to think that that's going to continue to happen forever. I'm willing. Each additional property I buy to live there for many years happily at a very low cost. Those are the ways that you can reduce your risk when you're going into a house hack and using leverage of owner occupied loans with 5 percent or even less down.
families, househacking
2793 - 2797 Brad Barrett Scott. Have you done that. Have you moved from house hack to house hack.
househacking
2797 - 2815 Scott Trench Yeah I've done it twice. I have two places that I've lived in as house hacks. So this first duplex I was talking about for 240 and I live in another one that we bought for 360 at the top. I live in the basement to top unit rents for about 15 16 hundred dollars. I had a roommate there too.
househacking
2815 - 2827 Brad Barrett So when you moved on from that first house hack I assume did you rent out the other bedroom since you had a roommate in your unit or did you just did you know he or she move out as well. And then you rent it again.
househacking
2827 - 2953 Scott Trench Yeah people have moved out and I got a new set of tenants. So I've been house hacking here and achieving this kind of return and paying nothing to live. And so I was just stockpiling cash at the same time bigger pockets was growing and because I was a commissioned salesperson I was able to sell more. So between those two things taking a reasonable shot at a career prospect that would pay off that increase my income and house hacking over the next two years I was able to accumulate nearly over 100000 dollars in net worth and nearly a hundred thousand dollars in investable liquidity. Once you get to that point where you've got six figures in investable liquidity, years worth of expenses that are readily accessible, opportunities begin to multiply in front of you. There is no one right path from that point on. I mean in Set For Life I talk about a couple of themes like index fund investing, because your house hacking your naturally building a real estate portfolio you can just continue moving on from house to house which is kind of like training wheels for a real estate portfolio. That's what I'm doing. Actually I invest in real estate and I bought another quad plex back in mid 2017 and want to buy another property here in 2018. Just like one a year and I throw the extra cash that I am generating and don't need for those down payments into index fund investing something both of those things. And then of course you have play money with which to try at small little assets you know you could spend a couple of thousand dollars and a couple of thousand hours writing a book for example if you want to create another asset you could try starting a podcast or a Web site or some sort of trial thing. And because you now have actual money and resources to throw at it out without fear of totally losing your investment and having that be a significant detriment to your life you can begin taking shots at various little opportunities one by one and eventually if you put the effort in and you are enthusiastic about them you should get lucky with one or two of them. Talk about luck again and have something something work out for you. And so I think there's no one right path. Once you get past that six figures of investable liquidity it's just enjoy the good problem of having more opportunities than time.
career, househacking, indexfunds, networth
2953 - 3030 Jonathan Mendonsa Wow that is a powerful cap and what struck me as you are saying that is tying it back to I think Episode 52 where we are talking with Todd Tressler you have a foot on all of these different asset classes you have pursued the real estate asset class you have pursued the paper assets on passive index investing. And then on top of that and actually this is kind of where I wanted to highlight as well in some way you are in this entrepreneurial asset class as well the business asset class but what's so unique about what you've done and I think for me it was a real eye opening experience was that instead of starting your own from scratch you got involved in somebody else's and you helped them 10x their own project and by realizing that for you it was more valuable to have a commission based income stream which is based on performance which is based on growing the business as opposed to some flat rate you're willing to take on a little bit more risk for yourself but because you have the time and the passion and the energy and because now your passions are so aligned with what you're actually doing you have had tangible results within a very short period of time and I'd love to hear your thoughts on someone instead of getting involved and maybe starting their own business from scratch. Actually finding a business that is in line with their vision and their passion and going all in on that.
indexfunds
3030 - 3128 Scott Trench Yeah. Before I talk specifically about that I want to mention this concept of risk and reward right when you are a full time worker spending nearly all of your income you know more than 80 percent of your take home pay. Losing your job is a huge risk if you have no cash to fall back on And a high spending rate. once you have a low spending rate and a lot of cash to fall back on, at least for me, it began to see make more of a risk to stay at the company I worked at as opposed to have a chance to live up to my potential. And so that shift in perspective happens differently for everyone. Some people are able to do that and started business by going to a VC firm and raising 100000 thousand dollars and just burning through it and seeing if they can make money before they run out. And that is crazy to me. But that's perfectly acceptable for some people. Some people are willing to start a business at the point where I was with 25 k and just see what happens. You know I probably would be more of a comfortable starting a business or becoming an entrepreneur now with thousands of dollars in passive monthly income and hundreds of thousands of dollars in net worth hundreds of thousands of dollars in liquidity. Where's that tradeoff for you. Where's the point. You know we hear about when do people leave fire. It's the same exact concept. It's you know some people need to get to that 4 percent. Some people need to get to 3 percent. Some people need to get much farther it's wherever that comfort level is for you and that's the power having that strong savings rate. Now that concept that I should explain to you exactly why I joined bigger pockets as opposed to trying to become an entrepreneur myself that was where I felt comfortable with that tradeoff of risk and reward based on my personal financial position at the time my career experienced all the other factors that were going on in my life.
career, networth, passiveincome, savings
3128 - 3149 Brad Barrett But Scott you certainly had entrepreneurial upside at bigger pockets and that and that is a cool step but I love how you have said time and time again about a luck and b one quote you said before was increasing the odds of success. And it strikes me that you're constantly looking for that in your life and it sounds like bigger pockets was the perfect opportunity for you.
3149 - 3210 Scott Trench Absolutely. And I think that things that increase the odds of my success at bigger pockets for the fact that I'm so passionate I mean the amount of times you would find me here. You know not right here now but at the office now but at the office at 10:00 at night writing for the blog. Josh wouldn't let me write for the blog during my he's like I'm not paying you to write for the blog I'm paying you to do these things for the business. Making Josh sound bad here. But that wasn't my job. My job was not to write for the blog and I was this stupid kid that didn't have any expertise there and I wanted to write. And so I wrote and I got crushed by the commenter's smart real estate investors that were here that would pick apart my arguments and say you have no idea what you're talking about. And I would just stay late trying to get better and better. I would use that as fuel and that kind of passion and desire. Learning from the users wanting to become a real estate investor wanting to build my portfolio. I think all those things absolutely really synergized with my work here. at Bigger pockets so I think that finding something that you're interested in enthusiastic and willing to throw yourself at will increase your odds of success for sure.
3210 - 3247 Jonathan Mendonsa Yeah absolutely. And you know what strikes me is that you are willing to be wrong and you're willing to fess up to that and then your ideas get better over time. And I think that's you know that's kind of what I brought to the table initially initially was enthusiasm and because I had heard all these other ideas but I hadn't built a framework with them and when I read your book I see someone that has a framework for their life choices especially when it comes to their financial choices. And it's really cool just to see how you've thrived in all of these different asset classes and how you're turning that around and within a relatively short period of time three four years you are becoming that mentor for tens of thousands of people that are following in your footsteps.
3247 - 3302 Scott Trench That's what's crazy. I think that what I'm doing is kind of normal and repeatable for most. I mean maybe not the bigger pockets part of it but the network that I've built. But the income and the financial things that I'm doing I think are extremely repeatable for most people and that's what's kind of crazy is I think that last year like last year at this time no one would really care about Scott Tranch you know. But now that I had a book and written about it it is this guy's like no no I'm a normal guy and I live a normal life. And I happened to have a book about finance because I think that it's a pretty commonsense practical way to just build your wealth. And that's very cool. But I don't want this to be like oh this is a really hard thing to reproduce, or you have to be really unusual or passionate. You have to want financial freedom and be willing to put a plan in place and be willing to accept many different perspectives along that way so that you can make the correct choices for yourself.
3302 - 3370 Brad Barrett Scott I'm struck by by this you latch onto this so early right. It was just a couple of months out of college that you found Mr. Money Mustache realized that your initial job while sure making great salary this this was not a long term goal for you. We're constantly talking about second generation fire here you know and how do we get these people who are who are young who haven't made quote unquote bad decisions about housing or cars or whatever it may be how do we get them onboard with fi when they don't even understand what a financial life is like or what the. I don't know almost like a horror show of having to work for 45 or 50 years at a job without ever taking more than a week of vacation at a time that's kind of hard to explain to someone. But I'm curious if you've ever sat back and thought how do I reach those people. What's the best message you. Have you reflected on that. Have you tried different messaging. Is there anything that gets through better to 22 23 year old kids in your experience.
2ndgenfi, college
3370 - 3449 Scott Trench I thought about this at great length and I've annoyed. I don't know if I can say this I'm going to say this anyways. I annoyed the hell out of everybody that I know at some point. Not everybody but friends family that kind of stuff. While I was getting on the journey to financial independence while I was doing my first house hack I like here's what I'm doing. It's great. You got to read this guy you've got to do this you got to do it you got to do it. And then what happened was it worked exactly the way I thought it would work. And then I now have a large amount of assets and passive income and I can't go and be like oh yeah work you should have done what I did. That doesn't work anymore right. So basically I'm trying to say is you're gonna be annoying if you're going to people that don't want to hear about this message and trying to spread it. This is not something that they want to hear from you. And so what you have to do is you have to live your life and pursue financial freedom for yourself and live a good life and be a good example and people will come to you over time. And those are the people that you can talk to about this right. I'm not pressing my book on everybody I meet and trying to get my friends and family and all to read it. They know I have it. It's it's a accomplishment of mine. But it is not something that I'm now attempting to spread it to anybody that doesn't want to hear it. People I think need to ask in order for you to inform them. you can share with what you're doing and why. But the moment you say you should be doing this, that's when people begin to shut down on it. I think that's the hard truth there.
families, househacking, passiveincome
3449 - 3455 Jonathan Mendonsa Do you think that now that you're the trenchaNater in 2018 and people are stumbling onto your site right now.
3455 - 3456 Scott Trench Yeah is this a thing.
3456 - 3464 Jonathan Mendonsa It will be. It will be after this episode. Just let it simmer for a little bit it's been in the interweb for a while now. I'm going to make it a full on thing. Power of ChooseFI.
3464 - 3473 Scott Trench Actually so we have a work slack epic pockets and Brandon in photoshop where he superimposed my head in sunglasses to Arnold Schwarzenegger's Terminator.
3473 - 3475 Jonathan Mendonsa I will find that.
3475 - 3480 Scott Trench I'll send it to you and Yeah you could put it in the show to it. And I got that. I got that right there caption the trenchanator.
3480 - 3512 Jonathan Mendonsa Weird Total coincidence. So now that we've been able to make that a reality I guess going back to my original point was people told you it wouldn't work or that you're crazy or kind of just gave you that pat on the head but did not in any way make you feel like you had the full support. It was kind of more of. Oh that's nice. He's trying something else. Do you feel that now that you've actually done this and you're talking about it on the bigger pocket's platform. You had this book that's been published that more people do find it because they found it on their own. Now they come to you and ask you about it.
3512 - 3569 Scott Trench I think that's spot on in the sense that yes I'm surrounded now with more and more people that are interested in it. And the question I always ask myself is has the movement the financial independence movement grown. Or am I just more in tune with it now and I don't know how to separate myself from it very well. You know I like to think that in 2013 nobody was doing this but Mr. Money Mustache already had millions of viewers viewers at that time. This is not new stuff that we're talking about here. People were doing it. People were biking to work. People were house hacking. I just didn't know them. And now I do. And so I feel like it seems like we have this big belief that hey our movement is growing. I think it is. And we want it to grow. We want more people to take control of their lives and become financially free as early as possible. But what will happen for sure is that you will at least begin to surround yourself with more people. I think it's hard to gauge whether or not the entire concept is spreading to more and more people as a percentage of the population.
househacking
3569 - 3600 Brad Barrett Yeah that's completely fair. And it's it is hard to know. It seems as if anecdotally that it's that is gaining steam. But to your point we're all so immersed in it so it's hard to hard to separate yourself out. But I know Jonathan and I get tons of messages from just regular people who were just introduced to it and said hey I love I love this message I'm going to spread it to my friends and family. But but yeah. You just don't know how far and how wide it is spreading. But but it seems as if the message is getting through to people.
families
3600 - 3635 Scott Trench Yeah I think it takes probably five 10 times for you hear the message from different sources before maybe it clicks. I don't know exactly when it was. I think it was probably during that financial independence radical personal finance podcast with Mr. Money mustache back in 2013. That was when I clicked for me. But I had known about the stuff I've been reading it for a while but that's when I was like OK I'm going to do it. I'm committed. I don't know when that is going to be for people but it takes a certain number of of these of these kinds of podcasts or blogs or books in order for it to really hit home.
3635 - 3641 Brad Barrett Yeah and Scott how fascinating that your first guest on your bigger pockets money podcast was also Mr. Money Mustache.
3641 - 3642 Scott Trench That was surreal Yeah.
3642 - 3662 Jonathan Mendonsa Now for the people in the audience that aren't aware of the context for this I know you just started a podcast bigger pockets money and what's so exciting is that you partnered with Mindy who many people in this community know as Mrs. 1500 to create that podcast. I'd love for you to talk to our audience a little bit about what the idea behind that was and where you see it going.
3662 - 3884 Scott Trench Yes. Mindy and I are probably the two biggest personal finance nerds at bigger pockets. We both we both work here. We love it Mindy. Mrs. 1500 is financially independent and she really enjoys spreading the message of personal finance. And you know she loves talking about real estate and all that so she's our community manager and we thought that we would be a good team for a podcast about personal finance. One of the things that frustrates me a little bit about real estate is people that have no income no assets and have years of bad personal financial behavior think that they're ready to begin investing in real estate and that's their cure all. But I believe that really it's the reverse. You have to get your financial house in order first and then invest from a position of financial strength in order to accelerate your position. I like it when I like it when real estate helps improve my financial position or accelerate my growth. But I'm not dependent on any of my real estate properties for my financial position. If that makes any sense. So that that's the kind of the theory behind this. And then we want to we want to spread good financial habits spread the message of financial independence and help people move to that point from which they can begin making serious significant investments. And so yeah we had you know the first step of that is going to be embraced frugality begin saving begin doing all the things you need to do to get your saving. You build wealth all capital and that kind of stuff and that's why Mr. Money Mustache was such a perfect and gracious first guest and that Dave was just so surreal for me. I went up I drove upinstead of biking cause he was far away and in my brand new Corolla that brand new Corolla is now brand you know four or five years old and we met and we hung around we saw the place that he's working on. He's built a mustache and headquarters which is pretty fascinating. Got a great deal and has really turned the place around. It was in pretty bad shape when he got it. Yeah it was just a kind of surreal day. We discussed a lot of things like self driving cars and bitcoin. All that stuff. You had a couple days after we met he came out of that article Why Bitcoin is stupid which I 100 percent agree with by the way. And yeah that kind of stuff. That was that was a great day. But then there were other episodes we were talking about various different things where you know we're talking about grocery shopping how do you bring your grocery bill down to. You know how do you do that as efficiently as you possibly can for that we have Aaron Chase from five dollar meal plan. And she's she has a fantastic overview of how to how to really dig in and eliminate one of these large expense areas and that's great because that's a very actionable way to take that first step. You know it takes time to change your housing situation or reduce your commute time. You're not capable to do that next week but you can go out and begin making some strides and eating a little bit healthier and saving hundreds of dollars a month by planning out your grocery bills a little bit better and then we're going to move on from topics like that we talked to Tiffany Leach and Tiffany runs a website that talks about how people can really go from bad financial positions with bad debt. That kind of stuff. Back to a position from which they can begin creating wealth and accumulating assets that kind of things. We talked to Sarah Wilson the go budget girl and she is a fascinating story. She had thirty thousand dollars in debt and was earning a very low income around thirty thousand dollars and she was there to pay that off in two or three years just through mad hustle and is now on that journey to becoming financially free back to zero now. And those are the kinds of stories that people need to hear that you need to get through those issues before you can begin really aggressively pursuing financial freedom. So our goal is to make this accessible to everybody and get everybody to a starting line of financial freedom and then go into. We will also I'm sure cover more advanced investing topics and you know entrepreneurship all that good stuff.
debt, frugality, health, housing, savings
3884 - 3909 Jonathan Mendonsa That's exciting then we'll definitely put a link to your show in the show notes for people that want to check it out. I love that you're bridging that gap and I think it can only help as we continue to spread these ideas and bridge the gap between real estate investing and passive index investing. You know these don't have to exist in a vacuum. These silos can be brought together and they can they will have a synergistic results. When you realize that you don't have to be all in on one hand.
passiveincome
3909 - 3928 Scott Trench Absolutely I almost never meet a real estate investor or even just a wealthy individual in general that has all their money in stocks or all their money and real estate almost never. It's almost always people like me have you have both. You invest in various different things and you build out a portfolio.
3928 - 3937 Jonathan Mendonsa Awesome we weren't able to go into real depth so we're going to put a link for your book and the show notes for anybody that wants to check it out. But if they want to reach out to what's the best way for people to reach you.
3937 - 3961 Scott Trench Well you could find on bigger pockets. My bigger pockets email is Scott at bigger pockets dotcom and if you want to about out something related to the book you can email set for life at pickpockets dot com my book. If you're trying to save money go to the library and request it. That's great. You can also buy the book on Amazon. You can buy it at Barnes and Noble and you can buy the bigger pockets dot com slash set for life. That's set for life not the number.
library
3961 - 3963 Jonathan Mendonsa Oh you should grab it both ways.
3963 - 3966 Scott Trench Yeah I probably.
3966 - 3972 Jonathan Mendonsa Missed opportunity. All right Scott Well normally that would be the end of the episode but on this show we'd like to give you a chance to tackle the hot seat. Are you ready for this.
3972 - 3975 Scott Trench Let's do it.
3975 - 4003 Speaker In a world drowning in debt and rampant consumption trapped by the chains of lifestyle inflation these questions highlight the secrets of those who are broken free welcome to the choose F.I. hotseat.
4003 - 4006 Jonathan Mendonsa Question number one your favorite blog that's not your own.
hotseat-blog
4006 - 4020 Scott Trench All right. So my favorite blog that's not my is Mr. Money mustache that's the one that changed my life. I'm sure that other people have heard that many times on this podcast so I'll mention another one called Financial Samurai which I enjoy as well. I think that Sam is a pretty smart guy.
4020 - 4026 Jonathan Mendonsa Yeah I think in the last couple of weeks I've heard his name pop up several times so Brad we really do need to reach out to him.
4026 - 4034 Brad Barrett You that would be a very good future guest. Thanks for reminding us Scott awesome Scott you're uh question number 2 your favorite article of all time.
hotseat-post
4034 - 4040 Scott Trench My favorite article I mentioned earlier on the show was how to hack your housing and get paid to live for free by Brandon Turner.
househacking
4040 - 4078 Jonathan Mendonsa Yeah. You know what. I don't think I can stress what an influence Brandon Turner and Josh Dorking had on my life in terms of creating the podcast and the format that they created. There's a lot of overlap between the way that bigger pockets tackles a podcast and the way that choose FI tackles a podcast and it was that idea of creating a community and bringing on people that can add these different elements to a specific strategy that you wanted to implement. And I tell you what after listening to them for two weeks straight I wanted to go all in on a different way to tackle real estate every single day. I mean it's almost overwhelming how much information they bring to the community.
4078 - 4090 Scott Trench Yeah I'm a big fan. I think that the theme is you're listening to smart people with contrasting opinions on various different things and that is how you learn and be able to make good decisions and that's at the bigger pockets Podcast provides and helps out with.
4090 - 4094 Jonathan Mendonsa Alright. Question number three your favorite life hack.
hotseat-lifehack
4094 - 4140 Scott Trench So my favorite life hack is going to I'm going give you two one is house hacking. I mean I've described that many times. I also like to bike which is a good hack for getting people started. I'm going to give you guys some credit because you guys changed. You know I had a glaring weakness in my own personal financial position which was the travel hacking thing. I'm in my 20s I'm 27. So I go to a lot of weddings. That's a big expense for me. I've got friends from around the country and I've got to go to these things and so I'm right now in the middle of pursuing my Southwest companion pass with the Southwest premiere business card I think it is the one I started with and I just finished my chase Sapphire Preferred card. So thanks to you guys I'm doing that now and I'm I've already been able to use some of the points from this program to save hundreds of dollars so that one was actually a very eye opening to me.
hotseat-lifehack, househacking, travelrewards
4140 - 4155 Jonathan Mendonsa Nice. I'm actually working on my companion pass right now by the time this episode airs. I will hopefully have it completely locked down but it sounds like we're about in the right place and certainly if you're listening to us in the beginning half of the year that is the time to start working on the companion pass.
4155 - 4157 Scott Trench Yeah I love that concept. That was huge.
4157 - 4174 Brad Barrett Yeah that's really cool. Got it. Glad to hear it. And yeah for everybody out there where my wife and I are finally back under Chase 524 so we're able to open up cards. We just opened up the Sapphire Preferred each so yeah it sounds like all three of us are working on very similar approaches right now.
4174 - 4197 Scott Trench I think it's great. By the way I want to plug your show because I've listened to your show and I think it's fantastic. And I have a number of episodes like that I like Chad Carsons. I liked fiery millennial Gwen. I like Todd Tressady. I thought you had a bunch of great EPs great guests on these on these episodes and I've really learned a lot. So I think you guys are doing some great things here. No surprise to me that you have one of the fastest growing podcasts and communities in the space here.
4197 - 4209 Jonathan Mendonsa Thank you so much Scott. It's really been a privilege to be a part of this community and honestly to go from listening to it on the sidelines and soaking this information up just like you are just how can I get involved right.
4209 - 4211 Scott Trench Absolutely.
4211 - 4214 Brad Barrett Alright Scott question for your biggest financial mistake.
hotseat-mistake
4214 - 4233 Scott Trench So I'm going to give you two here as well one is that new car I mentioned earlier and spoiled this question for you. And the second was failure to travel hack I had just dismissed. I hadn't known that travelhacking existed and that smart people were talking about it. I just failed to take action on it and that's cost me probably several thousand dollars maybe five thousand dollars or more over the last couple of years.
travelrewards
4233 - 4285 Jonathan Mendonsa Wow that is incredible. When you put it together you know when you stack several years of missed opportunity together it really becomes apparent what sort of money you're talking about and if you're a business owner it's even more profound. Especially with the amount of spending that can be put on a card. And it's just evaporating into thin air. So yeah I don't blame you for highlighting that. I think that many people don't realize how many specific aspects of their life there are for room for optimization. I think the biggest thing between taking action and just kind of looking at it and thinking what are those weirdos doing is just maybe knowing one person that's a trustworthy reliable person that's doing it. For me it was it was Brad. I had heard about it from like the points guys and you know travel rewards has been around in the space forever. But it wasn't until I heard Brad explaining that on the mad fientist podcast over a year and a half ago that it solidified for me and same as it did for you and I said wow what a missed opportunity.
travelrewards
4285 - 4302 Scott Trench Yeah I could go back and rewrite set for life. I would say eliminate your transportation expense you do two things you bike to work or walk to work and you travel hack and that actually is what wipe out that entire 17 percent of the average American household spending or the vast majority of it is those two things combined.
travelrewards
4302 - 4347 Brad Barrett That's So cool Scott and I love how open you are to changing your mind and getting new information. Right like you said you were kind of obstinate and kind of dismissed travel hacking but the more you learn about it the more you listened. OK. Hey this sounds legitimate and I've heard it from legitimate sources. Let me try it. And now it's changed the entire way you think about traveling so kudos to you. Don't beat yourself up about the lost opportunity. Just look at it as hey I'm moving forward in the right manner and that's how I advise everyone can beat themselves up about things in the past. And we constantly tell our audience the only thing you can do is make good decisions going forward. So yeah that's that's more to the audience than to you specifically because I know you're not really beating yourself up about it. But but it's an important point nonetheless.
travelrewards
4347 - 4351 Scott Trench Well I'm going to give the kudos to you because you're the one that got me doing this.
4351 - 4357 Brad Barrett Well thanks buddy I appreciate it. All right Scott. Question number five. The advice you would give your younger self.
hotseat-advice
4357 - 4414 Scott Trench So I would encourage my younger self to start earlier particularly in college when there's a lot less risk. Drink a little less. And try starting a few businesses or intern or join a startup in high school or college. Those are risk free ways to try your hand at big opportunities that cost nothing. And you know that's the perfect time to do it. If you're looking for these things if you have that opportunity try doing it earlier in life before you get going into that career because you know it was a struggle to break free from that career for that first year where I had to really kind of cut back and sacrifice and spend much less for example than I have to now in order to live a happy lifestyle and achieve a high savings rate. And so you know if you don't do those things you don't get started earlier in life you're going to have to go through this period of sacrifice or at least cutting back a little bit and making some big changes disruptive lifestyle changes in order to launch towards that. That first savings level.
career, college, savings
4414 - 4433 Jonathan Mendonsa I would love to slow down and talk about that one actionable point you gave there you said for that high school or try to get involved in a startup because there's no risk there. I mean practically what does it look like. How does that high schooler get involved with a startup. What direct actionable tips would you give to a high schooler that says I want to pick a different path and I want to find a startup to go work for.
4433 - 4508 Scott Trench Well you know you see stories of these guys that are doing this all the time. For example one of the things that struck me was this kid named Jordan Cox and he was the coupon kid out of the UK came with his mom. He was awesome. He'd already been learning how to build a website how to generate traffic how to help people save money. I think he's changed. I think he's rebranded now as an adult from the coupon kid too. I think is like 15 at the time and now he's like he's like 18 and he's rebranded and he's he's at money saving expert dot com which is out of the U.K. and he just goes to places and tells people how to save money on household items and all these different places around the U.K. go to his shop and have a good deal here. Here's how to how to do this kind of like that kind of thing. Starting at high school I mean that kid has already got a thriving business and he will never have to incur the expense of a college education. He wants one he will never have to enter into the corporate world. He's already got that foundation set and he did it risk free while still in school while still you know before grabbing the equivalent of the United States high school. Then you see stories about this every once in a while across the country. It doesn't seem like it's that hard to do. And even if you fail at least you have that experience to fall back on and you can talk about it later.
college, savings
4508 - 4553 Jonathan Mendonsa I was thinking about that as well. It's portfolio. If no one ever goes to your website if no one ever looks at the skill set that you've built just by trying and the fact that there's virtually no barrier to entry to start with this you need a computer at home that you can work from. I've seen Brad's home computers not very impressive. And he's built three businesses now online from his home and so this is something where if you're willing to just stretch yourself and pursue something that is outside the norm it goes back to those tips. We talked about earlier. Just be willing to take action on something immerse yourself in a community that's providing you good information and over time opportunities just open themselves up to you because you've positioned yourself to be ready when they land.
4553 - 4589 Scott Trench Yes that's the whole theme of of being of working toward financial independence in the first place. Yes You'll have a happy life. Yes you'll have control of your day. Yes you have all these things but really nobody and not very few people achieve financial independence and then sit on their bum all day drinking Margarita's by the beach and call that a happy life. Almost everybody that goes on goes and has some sort of opportunity, financial or otherwise, where they can go and make a positive impact on the world. And by continually setting yourself up and doing it earlier and earlier in life you increase your odds of recognizing and acting on those opportunities.
4589 - 4611 Jonathan Mendonsa All right Scott so you're 27 years old and you have reached financial independence or financial freedom basically your world has opened up to endless opportunities at this point is you picking what do you want to do. I'm curious. You don't have essentially you have essentially zero transportation cost and zero housing costs at this particular point in time. How much were your annual expenses last year.
housing
4611 - 4709 Scott Trench They were about thirty thousand dollars. And it's amazing how far that goes when you're not paying to live somewhere. Yeah I think I live a very extravagant lifestyle on thirty thousand dollars. Now I was living on less than that. A few years ago. But like I said I like my wings. I travel a little bit more. I go out to eat a little bit more. I'm not quite as good about making lunch everyday and all that kind of stuff. There are some dates I have girlfriend now so there's some there's some of that. That's the point of this is because I have some passive income even if I was earning a median income still you know sixty five thousand dollars or so I would still have a 50 percent savings rate and that's expanding because of my passive income. So I think that's the magic of going to that first couple of years where you really struggle to accumulate that wealth and then invest it then you have that passive income and you reduce your expenses and you can buy back the things that make you happy. One point I want to make on this is Joel from F.I. 180 had a great example of this. He was spending over a hundred and eleven thousand dollars per year. And he showed a graph of his expenses and we're down to like 80 the 2012 was 111. The next year 2013 was 80 then went down like 60 then went down to like 40 and then went down to 25 and went back up to. I think it was 30 or 35 and that was his happy level. And I think that's that was a concept that really stood out to me is hey lot of people when they start doing this they go too far. And I think you should you should cut out all these things. See what living on the bare minimum is for a year or so and then you put the back the things in place once your financial position is improving that make you happy and you stay at that level. And that's right that now.
passiveincome, savings, travel
4709 - 4720 Jonathan Mendonsa Wow. Talk about taking. I was basically setting you up so I could ask you a softball question about what you spent on Amazon and you turned it into its own self-fulfilling content that I could talk about endlessly.
4720 - 4725 Scott Trench I could talk about this. I'm sorry I ramble out sometimes of these concepts. Go ahead.
4725 - 4734 Jonathan Mendonsa Alright Thirty thousand dollars a year on a living expenses of thirty thousand dollars. What is your favorite purchase from last year and this can be on Amazon or somewhere else.
hotseat-purchase
4734 - 4773 Scott Trench So I bought myself two things one for fun one for work the work one was a buy set up a home office which has been huge because I'm sometimes a little obsessed with my work because I love working at bigger pockets and I stay late. This gets me out of the office every day at 5:00 so I go home enjoy myself and sometimes I'll catch up or do work or to write an article or something like that. That was great. And then the second thing I did was I bought a Xbox because I've always liked videogames. I gave myself the carrot and the stick a few years ago. Oh I'm going to reach FI in and play video games for the rest of my life and they're going to get exponentially better. That's going to be what I'm going to do. And I ended up not really playing that much. So I bought an x box and I play a little bit of videogames now and that's that's fun for me.
4773 - 4779 Jonathan Mendonsa That's awesome. Scott thank you so much for coming on the show and sharing your time with us. This has been a total blast.
4779 - 4782 Scott Trench Awesome thank you guys I've had a great time chatting about finance with you.
4782 - 4866 Jonathan Mendonsa To our community. I hope you got value from this. I hope you realize that there are almost an infinite number of ways to tackle the game. I hope that when you're listening to choose if you realize that we're not dogmatic on any particular lane but we are dogmatic on the fact that you need to take action. Your path won't take care of itself. It's up to you to go get access to good information and then implement it into your life and over time just continually get better by 1 percent of the time and every single aspect of your life. Thank you for listening. Thank you for being a part of this community. If you want to support us here four easy ways 1 leave us an iTunes review. You want to do that. Just go to choose FI dot com slash iTunes two use our page and sign up for travel credit cards. If you want to travel the world with miles and points instead of your hard earned dollars then just go to choose F.I. dot com slash cards and get started the day 3. If you're working on the milestones of fi set up a personal capital account to track your progress and use our affiliate link. It's completely free and just good to choose F.I. dot com slash PC P as in Paul C as in Cat and 4 and most importantly find your friends co-workers and family members who might be open to this message and tell them about the podcast. Have them start with episode 38 the Wi-Fi and right behind that have them go listen to Episode 21. The pillars of. It is a fantastic starting place. All right my friends the fire spreading. We'll see you next time as we continue to go down the road less traveled. You've been listening to choose FI radio podcast where we help middle class America build wealth one life hack at a time.
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