Mindy: A lot of people think building wealth and reaching financial independence requires complicated investing strategies, perfect market timing, or even an extremely high income. But for most people, building wealth is actually driven by a few simple principles repeated consistently over a long period of time. In this episode, we break down the six steps to building wealth and achieving financial independence.
Mindy: Hello, hello, hello and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and with me as always is my loves to build wealth co-host, Scott Trench.
Scott: Thanks, Mindy, great to be here. It’s not worth it to me to come up with a new, good pun, uh, for this particular intro. Mindy, I think that many people make building wealth out to be much more complicated than it has to be. It’s not extremely simple, but we can distill it into what I think six fundamental building blocks, which we’re going to talk about today, and I’m looking forward to it. So with that, do you want to kick us off with step one?
Mindy: Yes. So step one is tackle the big expenses. I don’t want to throw a little duh after this, but like, that is number one. Tackling your expenses because less money out for things can be more money into investment accounts. So let’s start with the big three: housing, transportation, and food. Housing isn’t just your rent payment or your mortgage payment. There’s a lot more to it. In many cases, as a tenant, you’re also responsible for utilities. You have renter’s insurance. If you’re a homeowner, you’ve got even more expenses: taxes, insurance, your HOA dues if applicable, repairs. There’s a lot that goes into your housing expense. And if you can keep this low, this is going to be one of your biggest expenses ever. If you can, the lower you can keep that, that’s the less money going to housing and more money available for your investing. Transportation, just like housing, it’s not just the car payment. It’s your gas, it’s insurance, it’s maintenance and repairs. I think it’s the repairs that a lot of people don’t remember to factor in or budget for. Food is restaurants and grocery stores, but it’s also coffee out, drinks at the bar, vitamins and supplements if you’re taking those and not tracking them as a separate expense. It’s a lot of different things and you can go out to restaurants and pay inflated retail prices for somebody else to make you dinners all the time or you can cook them from home and save a lot of money. There’s lots of ways to hack these expenses. And these are just the three big ones. What would really, really help you if you are trying to get your expenses under control is to know where your money’s going. Track all of your spending. When you track every single dime that’s going out of your pocket, you get a much more clear picture of where your money’s going. A lot of times when you’re not tracking your spending, you’re actually just kind of spending willy-nilly. Like, like your money is just flying out of your pockets and you don’t know where it goes because it’s only a dollar, it’s only $10. Like, what is that? I don’t need to keep track of that. But those little expenses add up. So to track your expenses, you can DIY in a notebook in the least technological way possible. That’s how I first started tracking my expenses when Carl and I were trying to figure out where all of our money was going. You can also do a spreadsheet. There’s a lot of DIY apps. Scott, you and I both use Monarch to track our expenses, track our net worth, track our investments. Once you add all of your accounts to your Monarch account, you pop in and you get a complete snapshot of your financial picture in like five seconds.
Scott: That’s right. Me and my wife track our spending with Monarch and we literally every week we have a little household meeting that we scheduled for an hour, it usually takes 30 minutes. And one component of that meeting is just to review the last week’s expenses, every single transaction and make sure that they’re categorized. That gives a tremendous amount of control over day-to-day spending. But I also argue that that’s the 20%, right? If you’re looking for an 80/20 approach to saving money, the 80% is your housing, transportation, and food expenses, just like you said, Mindy. This is not like a new analysis. It’s the most obvious analysis you could possibly come up with. It’s just that most personal finance discussions out there tend to avoid the hard topic of saving money on housing, transportation, and food, because they’re big decisions that impact you every single day. But because those are 60% of the average American’s household spending, and because I saw that early on, I chose at an early age to house hack or live with roommates. I lived with roommates for a year before I house hacked to keep my housing expense very low. I chose to buy a Toyota Corolla instead of a fancier car that I could have afforded, and a bicycle, which I generally used as my main means of transportation when the weather was nice or I could. And then I also decided to pack my own lunches most of the time with reasonable food from reasonable grocery stores instead of eating out for lunch or dinner on my own, for example. I did not forego meals out with friends when those came up, but for the vast majority of my food, reasonable purchases from reasonable grocery stores. And those three decisions are what enabled me to achieve a very high savings rate with reasonable choices everywhere else. It’s just that those require very hard lifestyle choices for the first few years, or at least a few years out of a career. And so people want to avoid those decisions. But if you really want to get ahead and achieve, you know, some kind of version of financial freedom early in life, I believe you must confront those three expenses or you’re going to severely handicap your journey.
Mindy: Yeah. And Scott, especially with the food, it’s not an either or. I either cook at home or I go out, there’s no in between. You said it best. You said, I still went out with my friends, but I brought my lunch to work. There are so many ways for money to fly out of your pockets just through food. And housing, I think right now we’re in a little bit of a squidgy situation. I know several people who bought a house a while ago, their house payment is now low, but if they would have bought a different house when they first started out, it would be even lower. They don’t have the option of house hacking or they don’t have the option of really reducing their housing expenses right now because of the interest rate environment we find ourselves in. But if you do have the option to house hack, it’s essentially it’s just living with roommates or owning a duplex where you live in one side and you rent out the other side and the other side helps subsidize your housing payment.
Scott: It’s not a difficult analysis to see that millions, tens of millions of American households once they buy a house that stretches them to their financial limits are going to be trapped in that house. It’s going to reduce their savings rate, deploy the vast majority of their liquidity and they’re not going to be able to sell or refinance unless things go very, very well. That was not a difficult analysis well before interest rates went up. We talked about it and it’s literally written down in many of the works that we’ve produced here. It’s just so much more acute with the lock-in effect, the low rates that folks have today versus, you know, versus how how we would have seen the situation five, 10 years ago. But it doesn’t change the fact that this is a very knowable problem that you can avoid for yourself if you make the hard decision to defer the dream house until you’re wealthy.
Mindy: Exactly. Scott, Carl and I are building our dream house. We have been married for 24 years and we have been live-in flipping to get to the point where we can build our dream house. You should see some of the houses that we moved into. Nobody would call them a dream. Now the ones we moved out of, those were dreamy, but the ones that we moved into, not a dream. So even if you can’t traditionally house hack, there’s still my version of house hacking where you are buying a house that isn’t super pretty and you’re putting money into it to make it look nice. We learned how to do all the work ourselves. We learned how to lay tile. We learned how to install wood flooring. We learned how to do all this stuff. It’s really not that difficult. However, even if you are paying somebody to do the work, chances are good, you’re going to make money when you sell the house. Now, I’m not guaranteeing you’re going to make money when you sell the house. You definitely need to know what’s selling in the area and not over improve or under improve for comparable houses near you. That’s an episode we could get into a little bit later, like how to live in flip, because I’ve done 11 of them and I’ve got some tips. But, uh, you don’t have to take it to the studs to make it a live-in flip. You could buy a house that’s got black walls on the inside of the house that nobody else wants to buy, buy it, paint it, and now all of a sudden you got a nice house.
Speaker 1: When you’re ready to start your business, Northwest Registered Agent helps you do more than just file paperwork. You get all the tools to build a real business identity from day one, a business address, website, phone number, operating agreement, free guides and more at no extra cost. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They are the largest registered agent and LLC service in the US with over 1,500 corporate guides. These are real people who know your local laws and can help you and your business every step of the way. With Northwest, your business is set up to stand on its own from day one. That means your home address, personal email and phone number stay private. Don’t pay hundreds or thousands of dollars for what you can get from Northwest for free. Visit northwestregisteredagent.com/moneyfree and start using free resources to build something amazing. Get more with Northwest Registered agent at northwestregisteredagent.com/moneyfree.
Speaker 2: When spring hits, some people suddenly just want to declutter the garage, clean out the closets, and get everything all organized. Whether or not that hits you, Monarch will do your financial spring cleaning for you. One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. One of my favorite parts is the Sankey diagram. Every month, I open it up and literally watch the flow of money. It shows exactly where every dollar is going from income to all of my spending categories. It makes it so much easier to spot what’s working and what needs tweaking. Get your first year of Monarch for half off, just $50 with the promo code POCKETS. Use the code POCKETS at monarch.com to get your first year half off at just 50 bucks. That’s 50% off your first year at monarch.com with the code P O C K E T S.
Scott: I’m skeptical of a lot of financial products, but life insurance isn’t one of them, at least not term life. For the vast majority of you listening, term life is simply the right answer. And the smartest way to buy it isn’t one big policy, it’s a ladder. Your need for coverage isn’t flat, it declines over time. You’ve got a 30-year mortgage, a couple of young kids, maybe a spouse mid-career. In 15 years, the mortgage is going to be smaller, and the kids are almost launched. So instead of buying one giant 30-year policy you’ll overpay for, you stack a few, say a 10-year, a 20-year, and a 30-year layer. So your total coverage steps down as your actual obligations step down. You only pay for what you actually need when you need it. Ethos is a platform that helps you find life insurance 100% online. You can get a quote in seconds and apply in minutes. There’s no medical exam, you just answer a few health questions online. You can get up to 3 million in coverage. Some policies are as low as $30 a month. That makes building a ladder genuinely fast. Get your free quote at ethos.com/bpmoney. That’s ETHOS.com/bpmoney. Application times may vary and rates may vary.
Mindy: Okay, Scott, now that you have thought about your big three, you’ve looked at where your money is all actually going, you have reduced the money that is coming out of your pockets and going to things, what are you going to do with that money?
Scott: Well, you got to start investing it, right? The number one correlate to financial independence, the timeline to financial independence, is your savings rate, the percentage of your income that you accumulate each year. You can increase that first and foremost by reducing your top three expenses, like we just discussed. But you can further reduce it by playing a tax-advantaged investing game, right? Some of the most well researched information out there suggests investing in market cap weighted, passively managed index funds. However, the way that you put money into those index funds can matter in to a big degree. And there’s a lot of different and debatable approaches about the best tax-advantaged order of operations. One that you might consider is going to be building an initial emergency reserve, maybe 1,000, 2,000 bucks, eliminating any bad debt with high interest, let’s call it over six, 6.5%, taking the 401k match offered by your employer, considering an employee stock purchase plan if the terms are favorable at your employer, then fully funding that emergency reserve to three to six months, then taking advantage of the triple tax-advantaged HSA, health savings account, if you have a compatible healthcare plan, fully funding your 401k or your Roth IRA. There’s a really good debate and there’s a decision to make about which one to max. If I’m in a lower income tax bracket, like the 12% income tax bracket, I’m probably going to favor the Roth, maxing the Roth before the 401k. If I’m in a higher one, like the 22 or 24% marginal income tax bracket, I’m going to want to max the 401k before the Roth. Then considering things like 529 plans and finally things like taxable investment accounts. After we are, you know, very close to approaching financial independence, that’s when paying off low interest rate debt comes into play. But you can see that there’s room for nuance and debate and discussion in there, but writing a tax-advantaged order of operations down and then progressing as far through that as your financial situation allows is going to be a major boost, maybe 10, 15% boost to your savings rate, depending on your tax bracket in a in a given year which can make a big difference on the journey to financial independence.
Mindy: Scott, you just ran through 11 steps and I counted out, not every single one of these will apply to every single person. There are five to 11 steps that everybody can use in their investing order of operations. So we’re going to make this a pretty little document to put on our resources page, which is biggerpocketsmoney.com/resources. And then you can go in and make your own investment order of operations. Take out the ones that don’t apply to you, keep the ones that do. If you want your 401k below your Roth IRA, you can move them around. We’re not the boss of you. But what I like about this, Scott, is that it gives people a place to start.
Scott: I mean a mistake people make is that I’ve made in the past is attempting to be optimal when reasonable ought to be the goal, and there are many reasonable, you know, variations of this order of operations. Picking one and committing to it and then changing it in year two or three as as your circumstances change is going to put you ahead of 99% of people.
Mindy: All right, what’s the third step to building wealth here, Mindy?
Scott: Scott, the third step is to actually have a written goal or vision or aspiration for your life. And I am going to go right back to you on this one. You created an amazing document that you have already uploaded to our resources page. It is the goal setting worksheet and it is a nine-page document. Carl and I are still in the middle of doing ours. It is not a five-minute job. It is going to require you to think about what you want your ideal life to look like. And I don’t want to work anymore, isn’t going to cut it. Scott, you have given such clear instructions and such great examples in the goal setting worksheet. But having a clear goal of the timeline you want to reach financial independence, having a clear goal of what you want your life to look like afterwards, helps you start thinking about all the things you want to do. Oh, I just want to quit my job. Yeah, and, you can’t just quit your job and, I mean, I guess you can just quit your job and sit around and do nothing all day, but I don’t think that’s really what most people are trying to accomplish here.
Mindy: So, Mindy, as you as you said, yes, I think that having a vision for your life is really important in the well, in the context of wealth building, because what are you saving and accumulating and investing for? This question has never been a challenge for me, because from the get-go, I had a vision, like what what I want for my life. And this is kind of cheesy, guru stuff in many cases, which is why we just offer this for free at biggerpocketsmoney.com/resources. You can just make a copy for free. You don’t have to give us your email address or anything. You can download it as a, um, a Word document or open it as a Google Doc here. And it’s just like a seven-page template. You can download it and modify it or write in it if you want to print it out. And it just says, you know, list some gratitudes, think about what you want your life to look like, your physical environment, what do you want your typical weekday to look like, your life with your family, your community and relationships, and then your physical fitness and health, mental and happiness, financial position, or other categories if those are important to you. Some people have spiritual, for example, that they put in here. And then I have my literal life vision, slightly modified for public consumption. But this is almost exactly what my wife and I talk about on a quarterly basis and update in there as an example. And what’s awesome is that the work that we put in over the last decade or, you know, 12 to 15 years in building wealth has spit out almost exactly the vision that we were looking for when we started. And that’s a wonderful, wonderful outcome for us and that’s that’s the point of doing all this. And the reason that’s so important is when you’re in year five of your grind on the a wealth building journey, you’re going to need to remember what why you’re setting out for this. Make sure making sure that you’re actually building towards this future life that you want that it’s still realistic and that you’re still on track.
Scott: Yeah. And Scott, this isn’t just you and me thinking this is great. We have 2,500 people who have downloaded this document already. So if you’re on the fence about it, just download it. Like Scott said, it’s free. We’re not even asking you for your email address, although if you would like to, you can certainly sign up for our newsletter.
Mindy: And then modify it. Make the changes. You don’t have to do exactly what we said, but if some, any version of here’s the future state that I want my life to work towards, um, will help you with that and then iterate on it, right? We thought we wanted something totally different five years ago when we got married, my wife and I, and we’ve, we’ve modified that and eventually settled on the life that we have today.
Scott: But the goal setting workbook is a great start. It gets you thinking about the kind of things that you should be thinking about, especially if you’re in the beginning of your journey. However, if you’ve never sat down and written out your goals, this is super helpful. I had to think about a lot of different things than I was thinking about Scott, so thanks. And this is my job. I talk about this all the time. Okay, Scott, what do we got next?
Mindy: Well, I think that translates very nicely into the the fourth step of wealth building, which is gearing up for the seven to 15-year grind towards financial independence. There are outliers who get their sooner and there are unlucky folks, I think, who achieve a 50% savings rate and who for whom it takes much longer to get to financial independence. But if you can get to about that 50% savings rate, you should expect a seven to 15-year grind to a state of of defensible, permanent financial independence. And this is a kind of awkward phase for a lot of folks, right? You’ve got your spending dialed in, your income is growing, maybe you’re getting an annual raise or a bonus along that that journey. You’re moving through, I use this word too much, but defensible retirement account investing stack and order of operations. And every year you accumulate and the market goes up, down, or sideways and compounds or accelerates growth, or maybe pulls back two steps forward, one step back. This is the journey to financial independence. It’s boring in the middle, fundamentally, once you get all of these automations and um, the foundational components into place. That’s the feeling of becoming rich. That’s that’s what this looks like. That’s what wealth building looks like. And um, you got to commit to that and make sure that that journey is pleasant, right? That’s where my framework was, you know, the fun in life is going out with friends, attending ball games, going on trips, those types of things. It’s not, you know, the crazy dream house in the wealth building years or the fancy car or ordering Chinese food solo, um, or in most nights. It’s the things that are social that are pertaining to my entertainment or fun components of life. Once I achieve financial independence, yes, then I want to begin thinking about the the dream home. Maybe I can upgrade some things if my wealth and my financial position support it. But that is really what I think is the grind is all about is making sure it’s fun, sustainable, rewarding your relationships and the important things in life are progressing, but you haven’t quite gone in and the splurged on the big things yet.
Mindy: Absolutely keep the end goal in mind while also building in rewards for milestones and for fun. Carl and I were like, oh, okay, we have to put our nose to the grindstone and just get there. And our journey was about 10 years and it was about 10 hard years. And if I could go back and do it over, I would have made it a lot more fun. Incorporate the fun things, incorporate the easy things. I might not have done quite so many live-in flips, frankly, but just taking a little bit of the burden of we have to get to financial independence off of our shoulders would have been really great. So do as I say, not as I do. Make it an enjoyable seven to 15 years. Hey, make it an enjoyable eight to 16 years. If it takes an extra couple of years to get where you’re going, but you love it the entire time, that is such a better experience.
Scott: Yeah, work hard, play hard is not incompatible with FIRE. Work hard, live large is incompatible with financial independence.
Mindy: Okay, Scott, I’m going to have you take the fifth step too. What is the next step that our listeners should be thinking about on their journey to financial independence and building wealth?
Scott: I think that this is where we, you and I, Mindy, and BiggerPockets Money, diverge from many other philosophies about building wealth. What we’ve talked about so far in reducing expenses, investing with a defensible approach, having a clear goal, and committing to the grind, that’s the formula for wealth building. But across how many reps, thousands of reps of talking to people who have actually built wealth and achieved financial independence, a huge portion of them and almost the overwhelming majority of those who get their very fast have also placed additional side bets, whether they’re live-in flips or house hacks or business bets or side hustles or, you know, some kind of project or alternative investment. Many, many, many stories in the financial independence community have these tales, these these one-offs, these things that don’t fit nicely into the box of the formula that we’ve just prescribed here. And we think you should be trying those kinds of bets as well. Not expensive bets. Don’t take 50 grand if you’re worth 100 grand and place it all on black in the, you know, in the investing space. But you can build a website, you can try something out, you can explore a house hack, you can think about a small partnership or try a side hustle while working your full-time job. And the success probabilities in any one of those does not have to be high if the cost to get into it is low, and the upside could be huge. And I think that you are doing yourself a disservice if you’re not placing a handful of those bets every year, you know, across the aggregation of your fire or financial independence journey because some of them will work across a large collection of bets.
Mindy: Yep. And I encourage people to start small and try something small. What is it, the lean startup, where you you try with a low out-of-pocket expenditure just to see if you like it. With real estate, don’t buy a big apartment building and then discover you hate being a landlord. Start off with house hacking or start off with a small Airbnb in your house, rent out a room one day or rent out the whole place while you’re gone for a weekend. Start small and see if you like it first. With side hustles, test it out. Oh, it turns out I love DoorDashing, or it turns out I hate DoorDashing. Or my favorite side hustle right now is reselling where you go to a thrift store and you find like low-priced items and you sell them for more money on like Depop or eBay or something like that. We’re going to be doing a whole show about that because I am so fascinated about that particular side hustle. Switching careers, we have had several people, the financial mechanic, a purple life, I know there’s more, I just can’t remember them, on the show talking about how they purposely job hopped to make more money. How long have you been at your company? If you’ve been at your company for more than three years and there are other companies that you can go to, start looking at opportunities that they have there because the onboarding budget is much bigger than the retention budget at your company.
Scott: Absolutely. Yeah, I think that there’s a little bit of an entrepreneurial spirit that we’re alluding to here. and if you can develop that muscle early in your financial independence journey, you’re going to explode your options set well before you actually reach this true state of financial independence with a liquid financial portfolio at the 4% rule. I think that’s really, really powerful. I think too many people are afraid of even taking, you know, dabbling in this area and it costs them years or decades in terms of optionality in their life and the progress towards the vision that they want. So I think it’s it’s really important to try these out. And then from my own experience, I had plenty of failures. I tried tutoring, which was terrible. I had to drive and then got paid like almost minimum wage and it was a waste of time for a few months. I Ubered for a while early and I didn’t I never not enough to figure out the real timing of how to actually make money on I did this on top of a full-time job. That was terrible. I tried a winter gloves for rental business. I thought I I floated a plan to do winter tire rentals here in Colorado, which would have been a horrible business model on here. But tho those failures compounded over time to allow me to find some winners. And they didn’t cost me very much, right? They cost me a little bit of time or suboptimal deployment of my time. And the things that really mattered ended up being things like real estate investments or books or joining BiggerPockets or the career switch that Mindy alluded to. Those things compounded over time and and made a big difference in my life. And some version of that is likely to happen to you as well, and it’s okay to have a few failures as long as they don’t cost you big.
Mindy: Yeah, I would encourage you to start with one and test it out. And if you don’t like it, give it a couple of weeks, a couple of months. If you don’t like it, stop and do something else. And like Scott said, don’t spend a lot of money on inventory trying to sell the next hot thing, because what happens is you get stuck with a lot of inventory.
Scott: Yeah, Trenches Tees is an example of that. I had a punny t-shirt business. One had a big windmill on it and it said, renewable energy, I’m a huge fan. Nobody bought this. And then another one was, um, a Buddha ordering a hot dog from a hot dog vendor saying, make me one with everything. This was also not purchased. The hot dog vendor responded, sure, but change must come from within. This is not a successful business. I spent a couple hundred bucks on T-shirts and learned my lesson. But, you know what? Like, is the ROI of that zero? Or is it immense across the collection of activities that I’ve done, you know, over the last 10 years since that very silly investment? I don’t know, but I think that that’s that’s how you should think about this with small amounts of money. This is not distracting you from your core formulaic approach to building wealth. This is a supplement to it and something that can’t really derail it, but gives you a shot at winning over time.
Speaker 1: When you’re ready to start your business, Northwest Registered Agent helps you do more than just file paperwork. You get all the tools to build a real business identity from day one, a business address, website, phone number, operating agreement, free guides and more at no extra cost. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They are the largest registered agent and LLC service in the US with over 1,500 corporate guides. These are real people who know your local laws and can help you and your business every step of the way. With Northwest, your business is set up to stand on its own from day one. That means your home address, personal email and phone number stay private. Don’t pay hundreds or thousands of dollars for what you can get from Northwest for free. Visit northwestregisteredagent.com/moneyfree and start using free resources to build something amazing. Get more with Northwest Registered agent at northwestregisteredagent.com/moneyfree.
Speaker 2: When the change in season hits, some people suddenly just want to declutter the garage, clean out the closets, and get everything all organized, and that’s great. If that’s you, or if it’s not you, either way, let Monarch do the financial spring cleaning this year for you. One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. Another feature I love about Monarch is the weekly AI recap. It catches spending spikes before they become problems and flags big net worth shifts or upcoming expenses. It’s like having a quick personal check-in every week so nothing sneaks up on me. Get your first year of Monarch for half off, just 50 bucks with the promo code Pockets. Use the code Pockets at monarch.com to get your first year half off at just $50. That’s 50% off your first year at monarch.com with the code Pockets, P O C K E T S.
Scott: If you’ve been putting off life insurance, I get it. The old process was miserable. Phone calls with an agent, a nurse coming to your house for a blood draw, then waiting weeks to find out what you’d pay for. That friction is exactly why so many people who should have coverage don’t. Here’s what I believe. Most BP Money listeners need term life and the right move is to build a ladder. A few term policies of different lengths stacked together so your coverage steps down as your mortgage shrinks and your kids get closer to being financially independent or you get closer to hitting your financial independence number. The thing that makes that practical now is Ethos, a platform that helps you find life insurance all 100% online. Same day coverage, no medical exam. You just answer a few health questions online. Up to $3 million in coverage, some policies as low as $30 a month. So building a two or three layer ladder that used to take a month of appointments is something you can knock out before your coffee gets cold. Get your free quote at ethos.com/bpmoney. That is ETHOS.com/bpmoney. Application times may vary and rates may vary.
Scott: Let’s talk about the sixth step to building wealth, Mindy.
Mindy: Increase your probability of success with the following habits. Number one, commit to a simple, effective goal setting and review cadence, annual, quarterly, weekly, daily. Scott has an amazing document. It is a daily document that he fills out. I would say probably 360 days a year you fill this out, Scott?
Scott: I was very religious about this during my wealth building approach. This last year, I’ve given myself a little bit more of a pass and I’ve done my weekly log this year. I probably should do my daily log again.
Mindy: Wow, only weekly. Well, the first time I do it will be the first time I do it. So still ahead of me. Yeah, look at this, hold that up, Scott.
Scott: This is my, uh, my weekly goal setting log. I have a little journal I’ve done for nearly 10 years now, uh, one after the other that I I’ve filled out that has my like big goals for the quarter, big goals for the month, goal for number one for the week, goal number two for the week, goal number three for the week, and then the vortex, the random crap that I have to get done that doesn’t fit nicely in my goals boxes.
Mindy: What did that give you when you did it daily?
Scott: I mean, this is, this is a free, essentially, exercise that condenses a my most valuable resource, my time, into focusing on the things that will actually move me towards the goals that I’ve set for myself. So it doesn’t mean I have to spend a lot of time on them, although sometimes that does happen, but sometimes the most important thing is sending the right email to somebody, right? And getting a response and and making sure that that the time delay on your end is very small. Sometimes it’s spend 15 hours coming up with a very detailed plan or strategy or doing a major project. Being honest about those things and prioritizing them appropriately, the acceleration to whatever you’re looking for is immense over time, and it compounds every year.
Mindy: And you get in the habit of sitting down and I’m assuming one portion of filling out your goal thing is looking at yesterday’s goals. Did I meet all of yesterday’s goals? So you’re starting to review what you’ve done. You’re spending your time productively because you’re you’re focused on, okay, what is the most important thing I need to do? What’s the next most important thing I do? How is this helping me overall in the big picture? You’re just thinking about your goals. As somebody who doesn’t do this on a regular basis, I can go a whole day and accomplish nothing. And that’s not the position you want to be in when you’re in the wealth building phase of your life. You want to be accomplishing stuff. Next up is self-educate aggressively. I am going to highlight Carl’s self-education. He gets up in the morning and he reads technology news. It is a passion of his, so it’s not a hardship, but he reads technology news and because he reads it every single day, he gets a good idea of what companies are doing over the long term. Hey, I think I want to invest in this company. I’m going to continue reading more about this company. Hey, I do not like what this company’s doing. I know that I’m not going to invest in this company. You know, the positive and the negative is both really, really helpful. Scott, when you were building wealth, how much self-education did you do on a daily, weekly, or monthly basis?
Scott: I think that the daily act of consuming information that’s relevant to whatever you’re trying to accomplish is the goal. And I had a lot of trouble quantifying that and I need to quantify everything because I’m an optimizer as you can’t tell. Uh and so I I translated that to 50 books a year because that was a quantifiable goal. If I read one book a week, I could do that. And then I supplemented with many podcasts or YouTube videos or those types of things. I think that there’s, you know, you don’t need to go that far. If you’re doing something for a few minutes every day that is relevant to your goal, you’re getting the intention of this. But however you track it and and define it, that’s the value, right? It’s not just learning random things, it’s at least attempting to learn something that is relevant to your goals every single day. That’s going to make a a huge difference over the course of a year or two. And I’ll tell you this, I’ve hired and managed a lot of a lot of people across my time as CEO. And yes, the experience does matter. But I’ll take somebody who’s read a hundred business books in their first two years of their career over someone who’s 20 years into their career, but almost never self-educates all day every day. The person with two years of experience is going to crush their 20-year counterpart who doesn’t self-educate every day of the week.
Mindy: Yeah, because those books were written by people who have the 20 years of experience. Here’s my 20 years dumped into, like here’s the important stuff dumped into a book. Times every single book that they’ve read. So you know Warren Buffett and I are best friends. I’ve been to the Berkshire Hathaway conference a bunch of times. He has said repeatedly that the most important thing he does is read. He reads like five or six hours a day. He has suggested that you should read 500 pages a day. I’m like, uh, how fast are you reading, Warren? But he attributes much of his success, his investing success, to the fact that he reads all the time. He and Charlie would just read newspapers. They read every single newspaper that, not every single one, but they read like all the big ones. The entire Wall Street Journal, the entire Financial Times, the New York Times. I’m guessing that these are the ones that they read, but they’re reading all of these newspapers front to back, especially the business section, so they can get information. Even though this story is going to be in all three newspapers, each reporter’s going to have a different take on it and they read and they read and they read. So if you want to be successful, you need to read.
Scott: I think the last hobby. So the first two are going to be some kind of goal setting ritual, ideally weekly, if not daily, self-education, and the third one is going to be networking. There’s some kind of intentional networking. Luck happens via networking. That’s where opportunities live. And that network is you cannot get lucky playing the umpteenth hour of Diablo 4, which I started playing recently actually, at home alone. It happens out in the world, online networking is fine if you’re going to be, you know, posting in a Facebook group or a Reddit community. you know, Facebook groups are are probably better because that actually puts your name attached to something and you have the ability to get your actual person out there into the world. Forums are great. You know, attending live in-person events are even better if the opportunities are targeted. But go out and figure out what are networking opportunities that are somewhat relevant to your goals and begin meeting people. if you have clear goals and you’re attending networking and you tell people those, doors may unlock for you, but they won’t if you don’t put yourself out there at all. And that’s so important and so unquantifiable. And I’ll put this out there. I am looking to network right now and I’m looking specifically to network with somebody that I just talked about, right? This this person who’s one to two years into their career and reading 50 to 100 books and highly ambitious to achieve financial independence early in life. If that’s you, email me at Scott at biggerpocketsmoney.com. I don’t know exactly where that leads. I just want to meet you and talk about your goals and see where things are going. But like putting yourself out there like that may help you in your life and please do reach out if you if you fit that description.
Mindy: Yeah, I want to go back to the networking just a little bit, Scott. When I first started working at BiggerPockets as the community manager, I was in their forums all day long and I got quickly got to know who knew what they were talking about, who was just starting out, and who was kind of not somebody I wanted to engage with. And there was mostly people I wanted to talk to and learn more about and help the the younger investors learn how to be a successful investor. And then when we had our first BiggerPockets conference way back in 2019, I met some people and it was, like I saw this all over the conference, like, I’m so excited to meet you in person. I’m so excited to meet you in person. On the flip side, if you are more of an introvert, here’s a tip. Everybody at these networking events is also an introvert. They’re just putting themselves out there because they want to succeed. Walk up to somebody who isn’t talking to anybody else, and say, hi, my name is, this is the kind of investing I do. Or, hey, my name is, what kind of investing do you do? You will start to connect with people who are similar. You will start to meet people that, oh, I really like this person. I want to spend more time with them. On the flip side, you can also go up to somebody who is standing in a rather large group and just kind of absorb what they’re saying. You want to get your face out there, you want to get your name out there. And honestly, people aren’t going to bite you just because you come up and say hi.
Scott: All right, Mindy, I think we’ve put had a pretty good or maybe, you know, a pretty reasonably comprehensive approach to building wealth here, right? So just to kind of relist it for folks to follow along, we talked about analyzing your expenses, identifying the big three, which are almost certainly going to be housing, transportation, and food, and then systematically tracking and reducing those expenses. We talked about step two, which is investing according to a well-defended order of operations investment approach. The third step is having a written goal vision or aspiration for your life that is compelling enough to actually drive you to complete the financial independence journey. The fourth step is committing to the seven to 15-year grind that almost everyone who achieves financial independence has to go through, even at a 50% savings rate. The fifth step is to move faster with a collection of side bets. Don’t just follow the formula for building wealth, do some things that could potentially accelerate your journey that make sense in the context of your opportunities or constraints. And the sixth step is to increase your probability of success with the keystone habits of having a system for setting and reviewing your progress against your key goals, self-educating on a daily or a weekly basis, and intentionally networking both online and in person.
Mindy: Scott, I think this is a great start. I would love if our listeners had more to add, if they could leave a comment below or reach out to Mindy at biggerpocketsmoney.com or Scott at biggerpocketsmoney.com and let us know additional steps that you would like to see in a list like this. And if you would like even more financial independence information, you can hop on over to our website, biggerpocketsmoney.com, where we have resources, templates, and free calculators. Everything’s free. You don’t even have to give us your email address, although you could if you wanted to. We just want to help you on your journey to financial independence. We will see you on Tuesday. We are having Bob Haynes back on the podcast to walk us through how to build your very own investor policy statement. All right, Scott, should we get out of here?
Scott: Let’s do it.
Mindy: That wraps up this episode of the BiggerPockets Money podcast. He is Scott Trench. I am Mindy Jensen saying later, waiter. Or waitress.
Speaker 1: When you’re ready to start your business, Northwest Registered Agent helps you do more than just file paperwork. You get all the tools to build a real business identity from day one, a business address, website, phone number, operating agreement, free guides and more at no extra cost. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They are the largest registered agent and LLC service in the US with over 1,500 corporate guides. These are real people who know your local laws and can help you and your business every step of the way. With Northwest, your business is set up to stand on its own from day one. That means your home address, personal email and phone number stay private. Don’t pay hundreds or thousands of dollars for what you can get from Northwest for free. Visit northwestregisteredagent.com/moneyfree and start using free resources to build something amazing. Get more with Northwest Registered agent at northwestregisteredagent.com/moneyfree.
Speaker 2: There’s a reason most big wealth management firms don’t like talking about flat fee planning. It’s because it puts the power and the profit back in your pocket. I’ve been working with David Jackson at domain money because I wanted a fiduciary who didn’t care about selling me products or making asset under management fees that grew as my portfolio grew. I wanted a partner who would look at my whole financial picture with all of its complexity and give me a personalized step-by-step road map to reaching my goals faster. If you want a plan that’s built for your benefit, not your advisor’s, you need to check out biggerpocketsmoney.com/cfp. This is a promotion for Domain Money, a registered investment advisor with the SEC. Bigger Pockets Money may receive compensation if you choose to work with Domain Money as a client. I, Scott Trench, am a current client of Domain Money and receive non-cash compensation related to this promotional activity. This is not personalized investment advice. For the full disclosures, visit biggerpocketsmoney.com/cfp.
