Mindy: When combining finances, is debt paydown the most important? Or should investing in real estate take the driver’s seat.
Mindy: Hello, hello, hello and welcome to the Bigger Pockets Money podcast. Bigger Pockets has a goal of creating 1 million millionaires. You are in the right place if you want to get your financial house in order because we believe financial independence is attainable for everyone, no matter when or where you’re starting.
Mindy: My name is Mindy Jensen and with me as always is my dollars and cents co-host Scott Trench.
Scott: Mindy, thanks for your uh a wonderful intro there. Today we’re going to talk with Lauren Heath, a physician’s assistant out of Canada who has her first house hack and no student loan debt. But, she fears that there might be a glass ceiling in her current career, and today we’re going to discuss and get into how she is planning for her future with her partner and address some of the concerns that they have about combined combining finances. Last, we’re going to touch on how they allocate their funds to work for the best, wind-filled life that they want in retirement, which involves traveling the world and kite surfing together. Lauren, welcome to the Bigger Pockets Money podcast. We are so excited to have you here today.
Guest: Thank you. I am even more excited to be here today. Like this, what an honor. So thank you so much for having me.
Mindy: I’m super excited to go look up what kite surfing is because I’ve never done that before.
Guest: Well, I have lots of details to share.
Mindy: Well, when you come visit, you can teach me how to kite surf.
Guest: Lawrence, I would like to know where we’re starting from. So, can you give us a really quick back story with regards to your relationship with money?
Guest: Absolutely.
Guest: So, um, myself, I grew up in a sort of middle middle class family, which where we were very traditional in that, um, my dad was in business, mom was a nurse. So, uh, very traditional gender roles in that, uh, dad looks after finances, mom looks after house, and that is how things go. And so just through observing, uh, their behaviors, I was under the impression my entire life that money was not something that as a woman I needed to deal with. This was, this is for the man to deal with. I’ll, I’ll find some man eventually who can look after this for me. Don’t even worry about it. And so growing up I was like, sweet, this is awesome. Easy.
Guest: And then it wasn’t until I started working, and I’ll dive into my career in a little bit, but when I started actually making pretty decent income right out of school, I was sitting there looking at my investments thinking, okay, I know enough to know that this can’t just be sitting here, but what in the world should I be doing with this? And so that’s what kind of was the igniting, uh, thought for me to dive a little bit deeper, learn, learn, learn, and then, um, uh, you know, just, just try and get my financial life in order.
Mindy: And what year did you graduate and start working?
Guest: Yeah. So I am a physician assistant. So I went to PA school in and graduated in 2020, which means that I’ve been out of school for the last four years. Um, luckily, as I, as Scott had alluded to, um, because we, uh, earn a decent income coming right out of school, I was able to pay off my student debt in the first year of practice. So that really set me up for a good runway for moving forward.
Guest: Um, but the other thing that I want to mention is that doing sciences all my sort of educational life, never had I ever been exposed to like finance in general, in that we I’d never took any courses on like how to do your taxes, how to save for retirement. Any of these things were were, um, like totally, um, not even in my like ballpark. And especially in the field of medicine, I find that money in general is such a taboo topic in that no one talks about it, um, in as compared to something like finance, for instance, where it’s like, you know, your water cooler chit chat involves that. Um, but in, in medicine, it’s so much about the patient. We’re doing it for the good of the patient. We want, we want the what’s best for the patient. And, uh, and less so about ourselves, which, you know, I agree. It is about the good of the patient, but we shouldn’t be disregarding our own, uh, financial wellness in the process. And so that is another thing that has kind of, uh, ignited my my financial journey and and wanted me to, uh, set myself up for success in the future.
Mindy: Okay, so you have no student loan debt. That’s something we should celebrate. Hooray. Uh but also, let’s look at your financial pain points.
Scott: So you graduated in 2020.
Guest: That’s right.
Scott: You graduated from school in 2020, totally financially illiterate. Because you’re located in Canadia and they have a different way of doing student loan debt and all those types of things. You had much lower student loan debt and were able to pay it off quickly. But I understand that Canadia does treats their physician’s assistance differently. I’m sorry, I’m going to use that one more time, and then I’ll stop with that stupid joke of Canadia here. Um, and and and there’s a you feel like there’s a glass ceiling in that profession. We want to hear about that in a little bit here. Um, you and then, um, you bought a house hack. You have a couple of side hustles. But you’ve generally been able to accumulate and it’s kind of like, what’s going to happen? What should I do next, right? I’m in a have a reasonably strong position, got a good emergency reserve, all those kinds of things that we’ll spell out in the numbers, but how do I now proceed from here and achieve some bigger financial goals? How am I doing?
Guest: Yeah, yeah, that’s that’s totally accurate. Now, one question for you is I’m not sure how much you want to involve like my partner and his kind of, um, income and and debt. Uh, I guess we talked about that in the intro, but so he is a physician or will be come July and he has um like much higher earnings but also a lot of debt. He has 150 of a thousand dollars of student debt, which, um, so one of our kind of pain points is like, well, how do we go about like, should we pay that down right away? But then how do I tie in like, um, uh, other investments such as like real estate and and, um, like uh, you know, investing in the stock market and whatnot, uh, to to help us achieve our goal of FI, um, also like mortgage debt as well as another one.
Scott: All right, we’ve got a great snapshot of where you’re starting and what your concerns are. After this quick break, we’re going to get more into Lauren’s financials.
Mindy: Welcome back. We are here with Lauren who is taking control of her finances.
Scott: As I see it, you bring in about 7 grand a month between your job, your rent, and your coaching program. Your partner generates about $13,000 a month, but that is likely to dramatically increase it sounds like once residency’s finished and, um, he becomes a full-fledged doctor at that point earning earning full full pay. Your expenses for you alone are about $4,700 a month, which means that you alone are bringing in a net of about $2,300 per month in cash that is flowing into your life and available for a variety of investment purposes, um, at the highest level. So that’s about, uh, what is that? $25,000 a year, um, give or take. You’ve amassed about $40,000 in cash across various checking account, your emergency fund, and a fun account, which I love. You have investments in the Canadia versions of your individual your your uh like a brokerage account and a Roth IRA, um, here. Um, uh, is that a roth or a 401k equivalent? Could you remind me?
Guest: So RSP is similar to a 401k and then TFSA is similar to a Roth IRA.
Scott: Perfect. So we got about 50 grand in those accounts. Love to hear it. And then we have a property, which is a big part of your portfolio. This property is worth 790. It has a 30-year fixed-rate mortgage of $621,000 on it, financed at 5.7% and you each split this half and half.
Guest: Yes, but as Mindy looks like she’s about to say, it’s actually three-year fix. That’s another thing with Canadia is that we have short shorter terms. So ours are zero or one to five and so we chose just given what we had anticipated the rates to do. We chose three years.
Scott: Okay, so that rate is going to hockey stick in a couple of years if we’re not careful, we have to plan on. That’s a good one here. Uh uh on this if if we’re not uh if we’re not careful here. So that’s something to just kind of keep in the back of our minds that that can go up pretty substantially in the next couple of years.
Guest: That’s right. And then the other thing with regards to my partner’s income. So he, I think that number that I put is the 13,000 is with his new job in July. Cuz so he makes a or 300,000 and then after taxes like 200,000 divided by 12. Oh, it’s a bit higher. So roughly like 16,000 a month or 17,000.
Scott: So you guys are in in great shape here with a ton of great prospects, but you’re still kind of just getting started on this financial journey. So the explosion of of accumulation that will go on over the next 5 to 10 years, um now that the full income is being realized by your partner has yet to kind of manifest itself on your balance sheets at this point. And there’s some high-stakes decisions to make now on which directions you begin to point your financial future at, um, to achieve your goals. So, let’s talk about the partner dynamic here and how that how are you thinking about that today and walk me through your thoughts on combined the pros and cons of combining or not combining your finances.
Guest: Um, so absolutely. So right now, my partner, he is, um, has the potential to earn, um, quite significantly higher, um, than myself.
Scott: What are you and your partner’s goals with money over the next 3, 5, 10 years?
Guest: So our goals together are to reach FI which will allow us to achieve our goals in terms of our personal life goals, our extracurricular goals, and to our goals with regards to our careers and how we want to feel fulfilled in our careers. And so, um, we hope to reach FI by within the next 20 years. Um, and so my question to you both is how do you feel, uh, would be the best way to kind of point the needle in the direction to help us to take off to achieve, um, FI in the next 20 years.
Scott: Awesome. And then, you know, the I I can I can respond cheekily with the statement of of once this income um starts coming coming in at this higher level here, um, depending on what your total shared expenses, which it looks like are $57,000 a year, you guys are be able to cover that with just your income and generate $16,000 a month after tax, which is a fire hose of cash coming into your life to be to investor to deployed uh in there. And so if we just multiply 160 * 12, we get to roughly $200,000 a year. We multiply that by 20. We have $4 million in cash accumulated before we even invest. Have you thought about what like that $4 million portfolio in 20 years might look like, um, or even if you, you know, let’s knock it down to 3 million because there’s probably lifestyle creep that will come in there at various points and all those types of things. But but you know, have you thought about like what a good shape of that might look like to you guys that would enable you to kite surf in Belize and feel great about um cash flow and those types of things?
Guest: Yeah, absolutely. So, I want to just take a step back too and just say that it’s it we’re our cumulative expenses are about 120,000 together. It’s we’re at about 60,000 each right now. Um, but to to answer your question, so certainly we want to our our sort of ideal portfolio would encompass uh a significant proportion of stocks, um like low-cost ETF, S&P 500, um likely maybe half or three quarters of our portfolio would be invested in that. And then the rest I would love I would love to get into real estate investing. It’s something that I’ve been researching for for several years now and I see the benefit and I see the appeal and I I recognize the amount of work and effort that is involved and I feel that that’s something that I am willing and able to take on. And so, um, you know, while my partner is going to be pretty focused on on doing his uh career, I think that would be something that I would uh be open to kind of managing uh for the both of us.
Mindy: Are you talking real estate in Canada or real estate in the US?
Guest: Oh, good question. Um, preferably in Canada just because of the proximity. I really like the idea of investing in my own local market, um, for ease and simplicity sake. Now, I haven’t discounted investing in the states because I do recognize and appreciate the um uh the market there and how it might be a little bit easier to achieve goals through that, but uh it seems to me as though it would be a couple additional hoops um and learning hoops to jump through and learnings uh to be had to understand how that would be feasible as a Canadian.
Scott: Yeah, Scott, do you know if Canadian citizens can get a mortgage in America? I think they can, but I don’t think it’s at the same rate that Americans can.
Scott: I I think that I am not very skilled in how foreigners access US real estate markets. And so I’m actually not going to be very helpful on that front. I will be able to help you more with the frameworks to invest in, but we should probably bring on an expert um in that world because I think that’s a big interest category for a lot of folks.
Mindy: I think that’s uh correct. Um just from the cost perspective, Canadian real estate is really expensive, and I’m not trying to knock Canadian real estate, but you guys don’t have 30-year fixed mortgages. So you’re stuck with things fluctuating every one to five years, which gives me the hebibis. I like solid solid uh 30-year fixed mortgages for my investing. But you can get a house in uh Louisville, Kentucky for like $150,000. And I don’t know of any Canadian city that has $150,000 houses.
Mindy: So, that’s, you know, that’s something to explore. I’ll I’ll give you that as a bit of a homework assignment. Um, I’m wondering as you’re sharing your numbers, I’m wondering if there’s any opportunity or any interest in you leaving physician’s assistant and becoming a physician. Like, are you halfway there with education or would you have to start from the very beginning as a physician and take all of the education?
Guest: I’m really happy you brought that up, Mindy because that is actually one of the options that I have been considering because so to me, um, where I see that I can contribute to our, um, like cumulative nest egg would be kind of threefold. In that either one would be through increasing my main income. And so that would be through something like that, like you proposed, like going the next step to becoming a physician. Number two would be pursuing a side hustle seriously, uh, to the point where it would um ultimately uh replace my main income or at least uh substantially you know, help to fill that gap. Um or um like pursue real estate as a full-time thing. Now that maybe would start as a side hustle and then grow, but um that is another option for me. Um as well as the other side hustle of the coaching business. So I think that to answer your question, that is certainly something that I am considering. Now, with that in mind, it wouldn’t be a small feat. In that, it would require probably eight years of um uh kind of opportunity cost in that I wouldn’t be earning in those eight years of school and applying and everything. Um now, with that in mind, coming out the other end, my income would be doubled if not tripled. And so that is, um, you know, maybe that’s something somewhere where I could crunch the numbers, but um like those eight years of lost income versus the earning potential that would be associated.
Mindy: Okay. And tell me about this coaching that you’re doing.
Guest: Yeah, absolutely. So, um, maybe you’re aware but the physician assistant, uh, programs in Canada, probably same as the US, are very competitive, and they requ they have a very, uh, specific style of interview, uh, called the multi mini interview, which consists of multiple different stations and it’s it’s it’s a tricky, uh, kind of application process. And so what I do is I coach, um, applicants in how to excel in their application and how to be successful in achieving admission to the program. And so this is something that I’m very passionate about. Like I I really enjoy working with these applicants, uh, but it is seasonal in that it’s only, uh, two or three months of the year where we’re kind of, um, working with these students around the application season, so it’s not a steady income year round.
Mindy: Okay. Um, and you enjoy doing that. How much time does that take during your week?
Guest: So, I would say it it’s a significant amount of work. Um, let’s say I do each it’s a coaching call which is over camera and each session is an hour and let’s say each evening I might have uh two to three calls and then plus prep time in between. So I would say like at least, you know, four hours a night for for per week kind of thing in addition to my full-time job. So it’s a pretty heavy workload while it’s underway. Um, and then like I said, nothing for the rest of the year. And I bring in about like roughly $5,000 a year through that.
Scott: So, you know, kind of this this seems like a huge decision that I think is much more art than science in terms of like career potential here. Um, like how do you feel about the eight-year opportunity cost to become a doctor? Like, do you passionately want to become a doctor?
Guest: That’s a good question. Um, it’s tricky because I might I might go on a legend and say no. Um, the reason being is that in my role right now, I actually do a lot of the same things. And so from a patient care standpoint, it is quite similar. And so I don’t feel that I’m lacking in that where the real differentiator is, is through the income.
Scott: Yeah, I I feel like in, you know, the path to becoming a doctor, I mean like it’s so competitive. You got to be at the top of of of the class the whole time. It’s an eight-year commitment. and yeah, I mean you can make a lot of money, but I I I just I find it interesting how many doctors then like want to become FI right after. I’m like, if you just like didn’t go to do all that, you could probably have been FI, you know, in 10 years anyways without the pain of med school and the like crazy residency hours that are like almost like hazing to a to a certain degree like with the amount of like lack of sleep and those types of things like it’s it’s really hard and I think a lot of doctors really struggle with that over time and I feel like it’s I feel like that’s something that for me, I would want to be very passionate about the medical field. um, and that as a career to go down that route and I it would be hard for me to a then take it as a path to fi because I don’t think you know that’s eight years before you earn the full income and there’s debt associated with that as well. Um that’s probably pretty serious as well. So I I don’t know if like how other doctors would feel about that, but I think that that’s that’s what I’ve seen in in in talking to a number of physicians that are looking for the the FI path downstream is like, hey this I didn’t really get I didn’t really become a doctor to get to five. I became a doctor because it was a calling and something on my whole life.
Mindy: We will get into your fire interest and share our thoughts on the allocations based on your numbers after this quick break.
Mindy: Welcome back. We just got into Lauren’s financials before the break and now we want to hear about this path to financial independence.
Mindy: Yeah, I think it’s really interesting that it would take eight years. That uh first of all, I have a physician’s assistant instead of a a physician and she does everything that a physician would do. So for you to have to essentially go to start over to become a physician when you already have the information or the you know the experience and the education, I would personally if I was in your position not do that. Um it just seems like you’re trading off eight years of $100,000 salary for a few years of $200,000 salary and then you would retire. I think it would push down FI quite a ways. Uh what about medical adjacent? Like medical device or pharmaceutical sales? And I don’t know how it works in Canada, but I had a friend who was in pharmaceutical or I’m sorry, medical device sales in America and he said some in some cases, he was making more than the surgeons that were inserting the device in the the operating room. So that there’s a lot of potential for income in America. I’m wondering how it is in Canada with the different insurance that you have.
Guest: Yeah. It’s a good question. I don’t know that I have the answer for sure, but it’s definitely something that I have looked into. Um these types of roles seem to be more salesy, which is is not a a good or a bad thing. I’m just not 100% if that is my personality type. Um, and that I don’t take rejection very well. And so, you know, I think that if you were to commit to that, um, yeah, it would be a different career path. And and the one thing I do like about my role right now is is being able to help people and and being like really uh, you know, like to serving people in a very genuine way. I really like. So, I mean, I wouldn’t say it’s off the table, but if I could reach FI in a way where I still continue to have that patient facing role and and feel that I’m uh, you know, really contributing to society in a helpful way, then I uh I think I would prefer that route.
Mindy: And that’s what I’m getting from our conversation is that you really enjoy being a physician’s assistant. You’ve already gone through the education, you’re actively working in the role for like coming up on four years. I think that’s the route you go and it stinks that you’re not making the same amount of money that a physician is when you’re doing essentially the same job, but I don’t make those rules. So we’ll just we’ll call it what it is and uh but I think that’s a great, you know, I think we’ve walked through a couple of these things. Do you want to be a doctor? Well, maybe, but I have to take off eight years. Okay, then that’s an easy no for me if I was in the same situation.
Scott: I think that that what you want to do really determines what you should then do with your money. Like if you’re going to go down the route of becoming a doctor, then I would say now is not a great time to get into real estate investment because you’re going to be consumed with medical school, residency, those types of things and then for the first few years of being a two doctor household and managing your duplex on the side might be very difficult um to manage from a time perspective. Um I’m assuming the hours for physician’s assistant are a little bit more reasonable and give you this flexibility or you feel that you will have some time to pursue an active role in a real estate investment uh uh capacity if things continue as they currently are. Is that right?
Guest: Yeah, that’s right.
Scott: Okay. Now, we we if we stay in that role and things continue exactly as they are including the coaching side hustle. I’m estimating revised estimate that you will accumulate about $120,000 in cash after tax each year. That’s 7,000 from you plus 16,000 from your partner minus $12,000 in um, expenses. Is that is that is that pretty close?
Guest: Yeah. Yeah, I think that’s right. Yep.
Scott: Okay. So let’s let’s call let’s round to 100 grand. 100 grand a year is going to come in and we want to deploy that somehow. Well, it sounds like you want to mix real estate and stock portfolio in the long run. And so to get there, a lot of the benefits of real estate and the freedom that real estate provides over a 20-year time horizon will come from investing now in real estate, letting leverage do its work in the early years and then having leverage be very light relatively speaking um on the portfolio in later years to produce more cash flow. So to me, that says that there’s a if if this is the interest, then now’s a perfect time to take those proceeds in the next year or two and invest 100 grand in one, two, three, four rental properties over the next four to five years, you can still continue, I think to make uh baseline contributions to the TFSA and RSP, the Roth and the 401K up in in a in Canada. But then you could take the majority of those proceeds and invest in real estate in these early years, amass a couple of properties and then in the later years really round out the after tax stock portfolio. That would that would seem to me like a a great way to get to that mixed balance that mixed portfolio while getting most of the benefits from the real estate in the early days and most of the benefits of cash flow, um, in the in the later years when you click when you approach five. What’s your initial reaction to that as a high level framing?
Guest: Yeah, yeah. I mean, that’s sort of along the lines of where I’ve been thinking. The one sort of a wrench in the plan is this lingering $150,000 of debt that my partner is taking on and or will sorry, has. And so as you can tell, he would be a big uh contributor to our collective investments and so he’s a little bit held up right now dealing with that that uh that debt. Um and so I guess one of our questions is, now he, now I guess I should also say that he could potentially he has the ability to pay it off in let’s say one to two years. Um, if he really wanted to focus and and just kind of um get that out of the way. And then we could start investing in real estate and after that. Um, but I wanted to know your guys’ opinion on, um, kind of how to tackle that debt. In that, should we be uh should we just sit with it and um, I say we because you know, we’re we’re kind of a team just working on it together. Uh though he would be paying it down himself. Um, should we be trying to pay it off and be done with it? Should we try to uh invest in real estate and manage the debt? Um, I should say too that the interest rate on that is seven or sorry, 6.95. Um, and so it’s relatively high.
Mindy: Is that a fixed rate, 6.95, or does that fluctuate?
Guest: It fluctuates. So it’s prime minus 0.25.
Mindy: Let’s see. Are you planning on combining finances 100%?
Guest: Ooh, another good question. So, no, we’re the philosophy that we are taking is we like the idea of having our own accounts and having a shared account which we use for shared expenses. We call it the yours mine and ours philosophy where um we’ll have a joint account that we each contribute X amount per month and then we use that account to pay down our grocery bills, our mortgage payments, yada yada yada. Um, and then we’ll still have our own um accounts. So, um, so to answer your question like, no, not necessarily.
Scott: Yeah, help me understand more about the how uh how long you’ve been together, what long-term plans are, those type those types of things because are you going to need to each achieve a separate financial independence or will this financial independence be achieved jointly um with equal ownership in the assets long-term?
Guest: Mhm. Yeah. So we have been together for many years. We’re definitely a long-term couple looking to get married probably within the next year or so. And so our vision together, um, are our vision for FI is that of a shared, um, vision, and so, um, you know, this is actually something I wanted to get your guys’ opinion on is how to best uh go about achieving our goals together, um, while kind of, um, maintaining our separate, uh, accounts to some extent, but, you know, still having that cumulative, um, uh, nest egg.
Mindy: Uh, we did an episode with Craig Kurlopp way back episode 35, uh, where he shared how he didn’t pay down his debt and instead, he focused on accumulating real estate. He’s American, he’s accumulating American real estate back in 2018, 2017. Um, so different market that we’re in, but he was able to get, I think he had three house hacks by the time he decided to pay off his student loan debt. So he paid the minimum and instead saved up for these down payments and then kind of snowballed his uh student loan debt once he had all of these house hacks up and running. So, that’s an option, but again, we’re in a different market. You’ve got higher interest rate, you don’t have fixed rate for 30 years. Um, how do you both feel about the concept of debt? Um, he’s got essentially one or 75% of his annual salary in debt. So technically, you could live off of your salary, tighten the belt, pay that all off in one fell scoop, or, well, in one year, and then just be done with it. Some people really feel the the weight of debt on their shoulders and they will do anything they possibly can to get rid of it. And some people are like, meh, I don’t care. I’ll pay it off when I pay it off.
Scott: Yeah, I I I just want to point, I want to just pick you back to things on what Mity said here as well. Craig, when he decided not to pay off his debt, lived in the living room, which was corded off by a curtain, so that he could Airbnb all the remaining units in his duplex in an up-and-coming neighborhood in Denver, which I know very well because I too lived in that place three or four years ahead of him in that that general area there. Craig student loan debt was not 7% interest rate at that point in time, and Craig was not paying his, you know, uh uh long-term partner’s debt at that point in time, he was deciding not to pay his own debt to to make highly leveraged real estate bets on on the side. So anyways, just those are some additional considerations there to to points of differences. Yeah.
Guest: Mhm. Yeah, absolutely. So it’s a good question and I I we had the discussion prior to this podcast, um, and his our our both of our thoughts were we are okay with some debt, but in this circumstance with specifically with the student debt, we feel that just getting it off our plate, getting it, getting rid of it, just doing doing away with it will create, um, more mental, um, sort of runway to be able to move forward and have a have a, have a free kind of thing.
Scott: I see the answer. I like this plan a lot. I like it for so many reasons. I think that this is the most obvious approach for your guys situation. Once you’re married and moving on this path, I like what I just talked about, right? If you want to back into a long-term portfolio, focus on real estate for the first couple of years, and then put everything into stocks after that. But for this next year, like what this is a great plan. You guys are not married yet. You haven’t made figured out how and when to combine finances. That will probably become clearer, I would think, post marriage at that point. This is a 7% guaranteed return. You just get 7% um as you pay down this debt. That’s pretty darn good here. Um this will give you time to evaluate and educate on real estate investment opportunities um in the local area or out of country if you’re going to do that and you can chunk it down in one year. Makes life super simple for um uh uh and you can pursue this separately. He your partner can chunk down the student loan debt um in the line of credit in this next year while you continue your investment approach here and then when you you you combine when you’re married, it’s a really clean balance sheet and a really great place to I think start that journey together in the official or like combined finance capacity. I’m stretching there with a couple of things. Any reactions to that any any piece of that or that overall?
Guest: I do agree with everything that you’re saying. Um, one other sort of, another wrench for you here is, um, just with regards to sinking fund expenses. And so what I mean by that is specifically, uh, we were talking about getting married. So as we know, weddings are godawfully expensive. um, and unfortunately, we want to pursue one. And, uh, as well as, you know, a honeymoon and and ultimately saving for kids in the next two to three years. And so with all that in mind, we as we know, those, um, can be quite expensive. I was, um, calculating it to be almost a hundred thousand, um, as a somewhat conservative number in terms of like what these things cost, um, to be put towards sinking fund expenses within the next, um, let’s call it like, you know, even like three to four years. And so I’m just my my my, uh, hesitation is how do we fit that in to paying off debt while investing in real estate?
Mindy: If I was in your position with your same parameters. I would look at this as we want our debt gone. And do you have any specific timeline for getting married?
Guest: Um, just in the next like kind of one to two years is what we had talked about, um, but if it makes more financial sense to adjust that then we’re open to it.
Mindy: Okay. So, I was speaking with Aaron Thomas, who is the prep guy and at a at the economy conference recently. And he suggested when there is income disparity like there is in this situation, that each of you contribute a percentage of your income. Let’s use 50%. So you each take 50% of your income and put it into the combined account. Now, you have 50% of your income to do what you want, and he has 50% of his income to do what you he wants. And but you have this uh this giant pile and now you can use that to save for retirement or save for the rental property or put down on the wedding or however you’re planning on allocating that money. So, I would look at a conversation with your partner, what feels fair to throw into this pot. If he’s putting 50% of his income into this pot, that’s going to help fund the wedding, but then he’s also got 50% of his income, so $100,000 to throw at his debt. He’s going to be able to still pay that off in, you know, maybe a little bit more than a year. But you’re not necessarily postponing what it is that you’re looking to do, um, with regards to the real estate and the the weddings and all of that. I don’t know how weddings were it’s been so long since I’ve been married. Um, I don’t know if you can get a loan for that. I don’t love that idea, but you could, you know, there’s a lot of opportunities to, you know, swipe the credit card and credit card points and um that sort of thing. But also, a wedding doesn’t have to cost $100,000. I think mine cost $5,000. Um, but it like I said, it’s been a hundred years and it was very small.
Scott: Just a couple a couple of things here as well. Like it does not make sense to me for your partner to save at 5% in a savings account for a wedding when he’s currently paying interest on 7% student loans. So I to me, it just makes better mathematical sense for him to just chunk that out as much as possible in the next year or two, um, and then you guys can get married whenever and that would bump up the line of credit essentially by a little bit at that point from the wedding, but at least we’ve like if if you like I think like I think your position, you got to just zoom out here and say how good it is at the highest level as a couple here. There’s going to be plenty of income and plenty of spread between that income and expenses for you to accumulate a lot of cash over the next three to five years. You can’t like right now without making a change, pay off all the student loan debt and have 100 grand left over to pay for all these expenses and buy a rental property. But like this is a luxurious set of tradeoffs here. You guys are in good shape here. The only reason there’s any debt in your entire combined financial picture is because the student loans and the house hack that you bought. Like this is not an irresponsible use of debt. This is a great use case for debt, um, uh uh uh in this situation. So I think if you just kind of zoom out in that picture, you guys are totally fine here at the highest level. And if you say, hey, for the next 18 months, we want to get married, go on a honeymoon and chunk down this debt as much as possible, you’re going to get pretty close to covering all of those things and maybe have like 20 to 30 grand left over there and still be just set up for a wonderful um wealth accumulation lifestyle journey uh in your 30s here. So I think like that’s the perspective I’d have at the highest level on all this. Now on that, if you’re going to have a 45k wedding, I assume a lot of people are going to come to that wedding. Is that right?
Guest: Yes.
Scott: Awesome. And and are these people that are going to come to the wedding? Are some of them going to be able to going to want to or be able to give a gift that is of some material value?
Guest: I would hope so.
Scott: Now, part of that $45,000 in wedding expense is going to go on a credit card, right your credit card or your partner’s credit card, right?
Guest: That’s right.
Scott: I see a combination outcome here, if that’s what you want to do of being able to knock that honeymoon expense down to close to zero between those two observations here. Right? There’s a travel hack here, be smart about that, educate yourself on that. figure out where you want to go and which credit cards um and and travel rewards will get you there and use that in the process of planning for the wedding and then have a registry that has the things that are most important to you and encourage people to after those few items are filled, donate to the honeymoon fund. Like that’s an easy button for a wedding attendee. Like great. Now I can send some money there. Go and have a good time. easy peasy. That’s what they want. Like, I I see a way to knock out a good chunk or at least that component and then again, like as long as you don’t let lifestyle creep get in the way, you’re going to have the cash and emergency reserves to cover some of these other things around home improvement or or future children in there at that time. So I don’t see that as a now problem to save for, um, and I think I think if you think about it that way, that will greatly simplify things because then you can just like say, great, we already have an emergency reserve, we are going to chunk down the student loans. If we decide to have a wedding, we can because you both invested so well in your careers um and your future here, that you’re going to have be able to cash flow and accumulating a little debt in your situation for that, if that’s what you really want, is no big deal to me. I’ll just delay your real estate investment by a couple months essentially.
Mindy: What do you think, Mindy?
Scott: I think that’s really spot-on, Scott. I like the way that you explained that too. Um, yeah, I would based on everything we have discussed, I would throw all the money at the student loans and get those taken care of and then start looking at rental properties. I would also look into American rental properties. You don’t have to invest locally. You can invest, you know, in a place that’s I mean you’re you’re going to save up $100,000 for a down payment, whereas if you come south of the border, you can pay $100,000 for a whole house.
Guest: That’s pretty crazy to me.
Mindy: Yeah, and with that $100,000, um, I believe you can get a mortgage but your down payment is going to be more than my down payment because I am a US citizen, but it’s still not going to be 100% down payment. So there’s the opportunity to invest sooner, start making money quicker uh just by looking in a different location. So I would definitely look into that and see, you know, start looking at the cash flow markets in America. Those are going to be the ones that are kind of in the middle of the country. So you’re Kansas City, Indianapolis, um, I know Florida was cash flowing for a while, but I’m starting to hear stories about home owners insurance is the insurance companies are just leaving Florida. Um, so I Florida is not my favorite place to invest right now simply because they have hurricanes whereas Kansas City does not.
Scott: One other thing I want to ask about here because I think it’s important to your long-term plan is like, could you describe what the FI lifestyle looks like to you and your partner? Like what is your day-to-day once you’ve once you’re done.
Guest: Yeah, absolutely. So, as I, so I’ll, I’ll talk, I kind of section it in my brain in categories of like career, family, and relationships and then hobbies and and investment too. I, I would say those are kind of my four pillars of how I frame it in my brain. Um, from a career standpoint, um, taking the time off to have personally time with my family and raising kids is extremely important to me. Um, and from and also just probably like healthcare is it is a slippery slope to burnout, let’s say, just because it it’s quite exhausting. And so I to me, the remedy for that is decreasing the number of hours worked. So whether it be a part-time uh thing where you’re working 20 hours a week, same thing with my partner. So, so sopursuing continuing to um you know provide care to patients in some regard but at a much more flexible schedule. And the other kind of big piece to go along with that is just the ability to pursue our hobbies. So we are both avid kite surfers. So kite surfing is a sport where you um, on the water, you have a board on your feet that looks kind of like a wake board and then you have this harness around your waist and then a big, big long ropes with a uh, kind of looks like a parachute that you fly around in the sky. And uh, it sounds funny to describe, but it’s very, very fun. That’s how we met actually was was doing this sport. And so one of our ultimate goals would be to travel the world and try and in search of like the ultimate kite surfing destinations. So whether it be like driving across Africa to like find these cool deserted beaches or um, you know, going to Brazil to like one of the windiest cities in the world to um find some of the really um expert kite surfers. um, that is what our vision of FI consists of and not all the time, but you know, I would say at least one to two pretty big trips a year uh to be able to pursue that and of course, get our family and and friends along the way. Um but uh having the financial um uh means to do that, but also the time and the flexibility in our schedules to be able to pursue that is what uh is the most appealing or gets me most excited about FI.
Mindy: Is kite surfing an expensive hobby?
Guest: Is it ever? It is crazy expensive. In that, so to give you an example, um, a kite that I, you’re going to um roll your eyes, but a kite that I am buying re uh like soon is a um six or 1,700 kite, which is uh one piece of equipment and let me tell you, you need multiple of these, um, pieces of equipment. And so, uh, you can see in my expenses listed here that I actually have what’s called a fun account. And so that is the income that I take from my coaching business, I put my my, uh, revenue into that account in which I spend on the these expensive pieces of kiting equipment is from that.
Scott: But once you own the equipment, the activity is free, right? So you could buy this kite and it could last you 10 years, right?
Guest: That’s right.
Scott: So it’s once once you’re set up with equipment you like, I mean, I’m sure like any hobbyist, you just can’t stop buying new um equipment of uh uh to keep the thing going. But like it’s like this trip around the world that you’d want to do, you would not be able to buy a serial keep buying equipment. You’d have to pick like one and take it with you to all these locations, right? One get up all. I’ll I’ll refer to this the set of things that you need here.
Guest: One or like three or sometimes five. You would be surprised Scott, but these bags, they look like picture like a a large golf bag or like a body bag almost where you’ve just shove equipment into it and you haul it all over the world. It definitely can be done.
Scott: Okay. So we we we need we need a baseline level of equipment. Let’s call it 25 grand. Does that sound like a high enough number to easily cover all of the kite surfing equipment you’d each need to do this or do you need 50?
Guest: No, no, no, no. 25 is fair.
Scott: Okay. So then I think that your plan here like you have to you have to really think down sit down and think about with your partner is like that activity that you just described is not conducive with young children, right? So you will have to do that now or in the next few years and not and then again in 10 years when you may not want to do that the same way at that point in time, when your kids are like well old enough to to the point where you’re going to be comfortable taking them to these remote locations around the world. So like that’s something to think about here is like that’s not really a FI consideration. Like you’re just not going to be able to, I think, to do that the way that you’re envisioning it if you don’t do that soon. And so maybe that in your case is even a reason to delay. Like, do you really need that first rental property investment? You know, I think physician and physician assistance jobs will be waiting for you when you get back from this trip. So, something there that’s like probably the opposite of what you expected me to say on bigger pockets money, but just something to consider in your situation if you really if that trip is is really like the the driving force there. I don’t know if you have a reaction to that bad financial advisement Andy, uh from your seat.
Mindy: I think that you can travel with children, but it is exponentially more difficult. So I would in your same position look at when you want to start having kids and when you want to start traveling to do these these kite trips and I can’t imagine kite surfing with a baby. I don’t even know what kite surfing is, so. But it’s on the water, right? So you can’t like you’re not going to strap your baby to you. So you’d have to have somebody watch or maybe you will like
Scott: Hey Virginia, will you hold Katie for an hour or three while I’m on the lake?
Mindy: I am always shocked when I see somebody on the ski slopes with a baby on their back as they’re trying to like teach their other kid how to ski. I’m like, oh no, don’t do that.
Mindy: Yeah, I this kind of puts some some different parameters in there. I mean if you do have a baby and then you go on this trip, somebody’s going to have to watch those kids while you are kite surfing. and I don’t even know what age you can start kite surfing. Do they have baby kite surfers?
Guest: I hope mine are. But I don’t know.
Mindy: I again, I just keep coming back to like this this trip sounds like once you have the equipment, it’s not going to cost you more than like 25 grand to do this for like a while because you’re basically be camping at remote lakes around the world and taking this out on there and drinking, you know, local beers and eating, you know, local campfire food. So like it seems to me like that’s not really like like you don’t need a lot of money to do that relative to your overall position. You might want to not like have this debt looming over your heads and those types of things. But like is that like the honeymoon there? You know, because that is that something that can be combined there like, hey, we’re going to do like a three-month trip and just like live this dream here. and then, you know, chunk out things a little bit more because like I I I don’t I That’s my that’s my big worry about your FI plan here. If that’s the dream, you may chase it for the next two decades and then not be able to live it, which would be super unfortunate.
Guest: Which is so funny that you say that, Scott, because I too agree with I agree with you 100% and as I kind of want to do this like right now, because it’s it’s, you know, it’s our dream, but um, I can’t help this nagy feeling of being like, well, is this really the smartest financial decision to be doing right now. Like would my investment grow exponentially if it were to be invested in real estate? Is it an opportunity cost kind of thing? But I think you also have a really good point that um the opportunity cost is also in our like physical ability and and willingness um at the our young and free uh lifestyle that we we have right now. So it’s a good point.
Scott: Yeah, like my my hobby was rugby, right? That was that’s very different to play rugby at 26 than 33. I don’t know how how kite surfing probably ages a little better than that one. um, but you know, it’s it’s a little different. So so so just something to consider there. I think that it would be irresponsible to go on a trip for three to six months right now with $140,000 in student loan debt hanging over and some these other things not figured out, but you might regret it if you try to amass $2 million in capital over a decade or two instead of taking this trip um, at some point earlier in that journey. And like with a 20-year time horizon, you’re going to delay your FI date by a year. If, you know, six months to a year, if you just make this a part of your like an earlier part of your travel plans, like your just your investment you made was in your incomes um and the like these jobs physician assistant and doctor aren’t going to be going away in five, six, seven years, I think, or at least that’s a bet I’d be willing to make. You can always lose on those, but like that’s not like I I wouldn’t be that that scared there. So, anyways, that’s that’s something to consider. Maybe that changes my my thoughts here of like can you use that honeymoon and that like all the things that are coming up to take that trip of a lifetime now? And then get back to work for a year or two, take another one, get back to work for a year or two, take another one, and then life will hit and at that point you’ll be in the grind uh moving towards FI and that would be and that would be just fine and you’ll you’ll love it then too.
Mindy: Yeah, I wonder what sort of opportunities there are for sabbaticals at your hospital or doctor’s office or wherever you’re employed. Um, because if you could take a one-month sabbatical, then you go out and you discover, hey, I thought I liked kite surfing, but I like it on the weekends. I don’t like it 30 days in a row or you discover that you do in fact love kite surfing so much. you want to sell your house and just go and kite surf all the time and like hop around and come back and do a a quick stent to generate some income and then go back out and kite surf again. I think it’s a great test of, you know, a a long-term trip is a great test of your like desire to actually do it. I love snowboarding, but I don’t want to do it, you know, every single day.
Guest: Yeah. Yeah, absolutely. Those are all very valid points. And, um, I really like your advice for both of you about, um, almost like seizing the day or seizing the moment now, because that’s when you have the, um, like energy and freedom and and, um, ability to do so. And I’m not sure, Mindy about like sabbaticals, but I’m sure you could kind of negotiate something or figure something out and and uh get that exposure. So, yeah, thank you for those suggestions. Those were really great.
Scott: Yeah, those options are all yours right now because your expenses have stayed flat relative to this enormous jump and jump in um income from your partner. So as long as that is true, then you will have these options. When that starts getting closer, like if you have kids and you decide, hey, I’m going to stop working there, which you said was something that you wanted to consider. That would then be less those things would be less true at that point, but because you spend less than half of what you bring in after taxes right now as a as a combined household here, you have so much optionality with all of these things and you can really rely on that. But again, factor in whether those goal posts are going to move for the the lifestyle expenses because that then changes the math and what’s respon what’s responsible and what’s not for your position.
Guest: Um, I have one final question to get your guys’s take on if that’s all right. Just like with regards to our um current primary residence. As we said, it is um the interest rate on this isn’t nothing. It’s 5.69 with the three-year fixed term. And so my question to you both is, like how would you approach paying down this uh mortgage? Would you be in a rush to pay it down or would you be trying to um leverage by using uh by like investing in other properties rather than uh trying to pay this down. How how would you go about uh tackling this kind of primary residence?
Mindy: So, with the next in the next three years, I would pay $0 towards the interest rate and if I was looking to pay down debt, I would focus on the student loans instead. After three years, we don’t know what it’s going to jump up to. I’m going to guess 7 or 8%. At that time, I would be more willing to put additional money towards this mortgage with the understanding that I was going to be living there for a long time. I’m going to be living there until I pay off the mortgage. Um, if your plans changed, like does this house work if you have one kid but not two? Does it work if you have 27 kids and it doesn’t matter, it’s your dream house, it’s your forever house, then once the rate goes higher than the 5%, I would focus on paying it down. Um, however, you’ve got what? Two, three, like three years of salary in this mortgage. So, it’s not going to take you a long time to pay it down. I would look at again, the the lower cost markets to see if there’s any way to generate other income, um, through investing in those lower cost markets rather than a Canadian market just because it’s so expensive. I mean, I can’t I’m I’m trying to think when the last time I heard of a Canadian house that was less than like $750,000, whereas you can buy a rental property in Kansas City for, you know, $150,000.
Scott: Yeah, look, I I think for someone in your shoes with a relatively long-term outlook on their finances. You’re not in like a hurry to become a millionaire in three years and willing to just totally upend everything to do that. You have a more kind of, you know, uh more I think maybe realistic, more more um, you know, uh um reasonable approach on there. Like, I would say for you, less than 5%, don’t pay it off. 5 to 8%, it’s dealer’s choice and over 8%, then it becomes a a priority, right? It’s hard to get a better than 8% guaranteed return um in this market. So because that’s 6.95% is there, um for the student loans, like I think that makes life very easy for that decision, just crush that. That’s a great guaranteed rate of return. Don’t stop contributing to the, you know, the the individual um the retirement accounts here, especially if there’s a match or anything, but after, you know, reasonable contributions are made there, chunk that down. That mortgage is a joint expense and so I think that’s a good one to like leave relatively untouched for now and to really kind of figure out how you want to handle that once you’re married. I think that would complicate things if for example, he’s paying the student loans and you’re starting to chunk out the mortgage. I think that would that would kind of complicate your situation just a little bit in the next couple of months so good one to kind of leave off until that point um for a variety of reasons. But that’s how I think about it. And then in three years, if that rate jumps, then and it goes you know, up you know, mid mid upper sevens or into the eights, God forbid, great. Then that’s your that that’s your primary investment from there.
Guest: I sure hope not, but I that would be scary if so, but yeah, that’s a very valid point for sure. Thank you.
Mindy: All right, Lauren, this was a really interesting conversation. Thank you so much for joining us today.
Guest: Thank you both so much for all your valuable insights and and your honesty. You both of you about just, you know, taking life by the reins and pursuing your passions now while you can. I I appreciate both of your insights. Thank you so much.
Mindy: And send us pictures from your trip on the kite surfing.
Guest: Absolutely. We’ll do.
Scott: So Lauren, I know that they do it different in Canadia, but you may want to check out episode 514 Travel Hacking 101, how to travel for free with these credit cards. We uh interviewed Eli Fanda and really kind of got some wow information from him. So, again, it might be different where you live, but something to look into and see if this similar opportunities do exist to help fund this trip of a lifetime or um the the honeymoon to a different location if that’s what you choose to do.
Guest: Cool, thank you. I will certainly check those out.
Scott: Thank you so much.
Mindy: Awesome, Lauren, thank you again for your time and we will talk to you soon.
Guest: Thanks.
Mindy: All right, Scott, that was Lauren and that was a lot of fun. What did you think of the show?
Scott: Mindy, I thought it was really interesting here because, you know, what I was what I was hearing that and I think this has come up with a lot of doctors. I bet you this is a problem that a lot of doctors face. They start their career and they’re like, I’m broke. I’m negative net worth because you know, I’m like late 20s, early 30s and I’m a doctor and you know, it’s like, hey man, like let’s zoom out here and remember the strategy here. Like you’re among the best and the brightest in your country to become a doctor. You have great income potential downstream. You will have the opportunity to build lots of wealth and achieve lots of financial outcomes in your life. But like probably trying to pursue fire in three years is not congruent with the approach of becoming a doctor. Like let’s go and enjoy and reap some of the benefits of that and live a great life and build lots of wealth over the next 10, 15, 20 years for the most part. Of course, if you want to do it and you want to sacrifice and cut costs and go do it, you can achieve a multi-million dollar net worth early in life. But remember what the goal is. If the goal is to go kite surfing or traveling the world backpacking around foreign countries, um in a very with very physically strenuous activities, you might want to do that on a break in your early 30s or mid 30s and not in your 50s or 60s. Some things are more important than early financial independence. You have to decide on an individual basis what those are for you.
Mindy: Scott, I love that you brought up goals. It’s not just about the money. And if your goal is to retire so that you can just travel the world and see the seven wonders of the world or whatever, that is something you can do when you’re, you know, 40 or 50 years old. But kite surfing, I mean, I can’t even imagine kite surfing now at uh slightly older than our guest Lauren. Um it just is a physical activity that I am not going to be able to do right now. So I love that that was your uh advice to them, to to her to focus on what she can do now to accomplish this kite surfing goal. And yeah, I cannot imagine trying to go on a kite surfing adventure with small children, which is what it sounds like would have been the goal. Um so I I really like that you reframe that and they’ve got such great income potential. Yeah, check out the sabbatical, check out a longer vacation just to see if if you can do this and if you want to do this, if this is really the goal that that you think it is, um or the dream that you think it is.
Scott: It’s totally okay to not know what you want to do when you achieve FI and just aggressively pursue it because you want that freedom. Like I can totally emphasize emphasize that. I did not have a dream of kite surfing or anything like that. In fact, I buy a lot of real estate so I can sleep inside, not outside, um, on a regular basis. And so, you know, it’s totally okay to have those and just to pursue fire with a will and really make the sacrifices and changes to do that because it does bring a lot of options that you can then see from the other side. Um, but if you know exactly what you want your life to look like after fire and it involves taxing your body to the limit and doing these things that require balance, speed, coordination, strength, all those types of things. You got to really weigh that in the context of your overall financial position. That may not be congruent with fire unless you’re going to really crank it and get it done in three to five, seven years, um, and and really incorporate into huge chunks of your life. So I thought that was a really good lesson and a good um I think we learned a lot from Lauren. Um hopefully we helped her with some of the decision making in terms of how she’s going to priotize cash flow.
Mindy: Yes, and what I love so much about Finance Fridays is all of the specific scenarios we talked about were Lauren’s. But a lot of our listeners are going to identify with different aspects of her story. So that’s why we do Finance Friday. And if you have an interesting story or an interesting problem, we would love to talk to you. Please reach out to Mindy at Bigger Pockets dot com or Scott at Bigger Pockets dot com. Or if you would like to apply to be on our show, go to biggerpockets.com/finance review. All right, Scott, this was a super fun show, but it’s time to hit the road. Oh, it’s time to hit the the wind. Are you ready to get out of here?
Scott: I sure am, Mindy.
Mindy: All right, that wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench and I am Mindy Jensen saying, go fly a kite, but I’m saying it in a nice way.
Speaker 2: Bigger Pockets Money was created by Mindy Jenson and Scott Trench. This episode was produced by Ericson. Copywriting by Calico content. Postproduction by Exodus Media and Chris. Thanks for listening.
