Mindy: Welcome to the BiggerPockets Money podcast, show number 324, Finance Friday edition, where we interview Gracie and talk about saving money and building wealth, even when it doesn’t seem like there’s any easy options.
Guest: But one of my thoughts was maybe someone just needs to tell me to get over myself and figure this out instead of just spending and then wondering what happened. So, I’m good at that. I’ve done that for 10 years, you know, I did the payoff and then we did FI. So, I’m a little bit, um, throwing a little tantrum inside because I didn’t want to get to this point and have to continue, uh, cutting the budget that much, but, um, if we can do a three-year model where, uh, I see flexibility opening up in the three years, we could do it, I think.
Mindy: Hello, hello, hello. My name is Mindy Jensen and with me as always is my carefully considering all angles co-host, Scott Trench.
Scott: And with me as always is my thoughtful co-host, Mindy. Great to be here.
Mindy: Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.
Scott: That’s right. Whether you want to retire early and travel the world, coast-fi, go on to make big time investments in assets like real estate, uh, or start your own business, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.
Mindy: Scott, today we’re talking to Gracie, who has a great financial position if she wanted to do CoastFI as you mentioned, um, which we talked about on Monday’s episode with Jess from the Fineers. And, uh, it’s kind of funny how sometimes these shows just work out back-to-back like that.
Scott: Yeah.
Mindy: And she also has, like, she’s, she set herself up in a great position, but I think she wants a little bit more. So there are other options she can pursue.
Scott: Yeah, I think I think that there are definitely options, but there are no easy options and um, there’s a lot of, you know, there’s there’s a lot of, we want a lot of things. We want to be able to have plenty of time and we want to be able to have a surplus of of of uh, of of money. We want to have passive income. Um, we want to save for retirement. And sometimes you can’t do all of those things at once. You have to prioritize and pick and make sacrifices on some of those in some of those areas. And that’s hard and that’s what we’re going to get into today.
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Mindy: Yep, absolutely right. So Scott, I want to remind you and our listeners that the contents of this podcast are informational in nature and are not legal or tax advice, and neither Scott nor I nor Bigger Pockets is engaged in the provision of legal, tax or any other advice. You should see your own advice from professional advisors including lawyers and accountants regarding the legal, tax and financial implication of any financial decision you contemplate.
Mindy: Gracie and her husband Frank live in a high cost of living area. He works full-time while she stays home with currently two turning to three kids in November. The shift from two incomes to one was a bit of a shock, and their initial fi number now seems too low. They’re currently saving 14% of their income after taxes, and Gracie’s wondering if she should go back to work once the baby is born, so they can increase their financial cushion. Gracie, welcome to the Bigger Pockets Money podcast. I’m so excited to talk to you today.
Guest: Hi, Scott and Mindy. So excited to talk to you. Thank you.
Mindy: So, we’re going to do something a bit differently today. I’m going to read Gracie’s financial snapshot. She and her husband make a salary of $101,000. They have additional income of approximately $24,000 for a grand total monthly income after taxes of 8750. Their expenses seem pretty good on the surface at 7135. We’ve got 2,000 for mortgage, 400 for utilities, almost 1,000 for groceries. So I see a point right there that we could work on. Um, 150 for beverage, 300 for home supplies, 115 at restaurants. You’re doing really good there. 125 for gasoline, $457 for giving, $388 for medical, which is really in America a steal. $159 insurance, miscellaneous at $700, $147 for car insurance and maintenance, and an average no questions asked spending fund of $973 a month, travel at 280. So just off the bat, I can see some areas where it would be easy to improve, but I don’t have any backstory on those. So, we’ll get to that in a moment. As far as investments go, we have retirement funds at $495,000. Nice job at age 35. Uh, mutual funds in $206,000, and I do want to clarify what mutual funds means. Other in 16,000, that makes me um cringe and think maybe crypto. Cash at 23,000. Home Thank you, thank you, thank you. Home equity of $210,000 for a grand total of $950,000. So, with our debts at nothing except for a home mortgage, 2.75% interest rate, $490,000. All in all, I see this and I think you’re doing really good at age 35. I mean, you’re doing really good anywhere. Americans aren’t saving money. So this is a great picture of your financial situation. Let’s look at how you grew up with your finances.
Guest: Okay, um, so I do, yeah, it will be helpful to go back just a little bit. So starting out, um, my family had very little money, um, and the money we did have, we didn’t do very well with. I started working at the age of 15 and I’ve worked every year of my life. I’ve spent every dollar or I spent every dollar of that and quickly racked up 60k in debt by the age of 24. And, um, that did include about 30 grand in student loans, even though I started out college with a full ride. Um, but they don’t give you a full ride back when you drop out of school and go back later. So, um, anyways, in 2011, I did find Dave Ramsey, thankfully, and, um, was halfway through my college degree. and actually started, um, just paying off my debt and cash flowing the rest of my education. Um, I did everything Dave Ramsey suggests, multiple jobs, cash envelopes, the whole thing. I even got out of an upside down, um, vehicle loan, which was one of my greatest achievements. Um, around two years into that and my original, um, estimate was that would take four years. So about halfway into my process of paying off debt and finishing school, I met my husband Frank. And, um, he also came from a family without a ton of money. However, they were great with money. They were frugal and good savers. So, we have a little bit of difference there. He had no debt other than a mortgage when we met and assets. Um, but non home assets. So it’s great. Um, his family only paid for half of his college and he paid the rest with summer jobs. So he was doing well and he was okay with my situation just because I was cleaning up my mess. So it was great. Um, 2014, we get married, we, um, finish paying off our debt and I guess we were looking up what to do when you hate your job because we started, um, making plans to do a mini retirement. Um, I believe I was listening to Tim Ferris a lot, and I do recall finding, I don’t know how, but I read the early retirement extreme book. I actually read that book. I loved it. But, um, anyways, I haven’t read it in quite a few years. Um, so anyways, we did that. We started our mini retirement with a plan of one year of travel around the US and South America. That lasted five months.
Scott: And this is in 2015?
Guest: Yes, we started that trip in 2015. But, uh, we ended up moving to where we live now, which is a pretty high cost of living area, um, not the highest, but, um, pretty up there consider considering where we both moved from originally.
Scott: And what state is that?
Guest: Colorado.
Scott: Ah, excellent.
Guest: So, we moved here, we still continued hating our jobs. And that is when we discovered the infamous Mr. Money Mustache. So, we went all in on reading that blog and we were just on the same page to really try this financial independence thing. So, we began in 2016. And I think that’s about the time that Mindy and Carl, you guys finished your journey. Um, I do remember we did see the 1500 blog. We were, we knew all the blogs. Okay. We knew everything. But our biggest thing was the Mr. Money Mustache. So we followed that. We set our goal for a million dollars. We planned it out. It would take five to seven years. and approximately six years later, we did hit our number. uh, in December 2021. So we hit our million dollar net worth number. And we should celebrate, right? Um, but yes, that was a big year in general. We had our second baby in 2021, February. I quit my job in June and have been a stay-at-home mom since then. And we also bought a new house in July. So, um, even though I wasn’t working half the year, we still hit our number. Well, now, um, we have hit our goal and we’re in the middle of a potential recession. I know they haven’t declared it yet. And the largest inflation we’ve seen. and we’re not really sure what to do from here.
Scott: Congratulations. That’s awesome. You have you you hit your goal. You’re you you have two kids and another on the way. so you’ve obviously been crushing it. Can I ask you what, um, prior to you quitting your job, what were what is your, um, what does Frank and yours’ profession?
Guest: Yeah, so, uh, I was an accountant. Uh, I have a CPA license, but I worked generally in industry, not in, I did like one tax thing, so I was a general accountant and uh my and Frank is a an engineer. So he actually works for a construction uh, company and is now doing like estimating.
Mindy: Okay, so I see lots of awesomeness. and before we get any further, I want to highlight the fact that you are 35 years old. Right, you’re 35?
Guest: Right. Yeah, we are both about the same age. Yeah.
Mindy: You’re 35. You have $1 million in net worth. You have zero debt outside of your mortgage at a 2.5% interest rate. Your house is worth way more than you paid for it. Well, you bought in June of 2021. Yeah, your house is worth way more than you paid for it. And you have a marketable skill. So if something happens, you could like people still need CPAs all the time. Worst case scenario, you can go do taxes the first part of next year. There’s a lot of optionality you have, but you’re sitting in a good financial position right now. It may not seem like you’re sitting in a good financial position because you hear from people who come on this show and they’re like, yeah, I’ve got no kids and I’m saving 97% of my income. Well, great, that’s that’s their story. Your story still has you at a $1 million net worth. That’s awesome. Let’s celebrate that.
Guest: Thank you. Yeah, and I have to say, like accounting was not my favorite thing to do, but I did it for 10 years because we had these goals. And finally I was like, you know, I don’t think I should say a job that I do not like just to make a little more money when I could be with my children. Um, hardest job in the world, but, uh, definitely, I couldn’t see the trade-off anymore, especially given our position. It’s like, okay, we’re not underwater. We’re not like, you know, in a bad position. So why trade more money for a job you hate, right?
Scott: Absolutely. So, so what what are the goals here? What what can we best help you with today?
Guest: Uh, so, big picture, we want to spend time with our children. Uh, Frank works full-time right now, and I will say that he’s in a better position with his job than he used to be because we live closer to his office. He bikes to work. He has very pretty good hours. I don’t want to say easy, but he is not doing like 60-hour weeks. So, he’s in a pretty good place, but he would ideally like more of a flexible work schedule. Maybe a four-day work week, maybe something partially remote, um, so that he can spend more time with me and the children. Um, I get to spend lots of time with the children and would love a little bit of, uh, you know, maybe regularly scheduled child care without necessarily putting them in a daycare, you know? So, that’s kind of our big picture. Um, more specifically, I would like a little more flexibility with our budget because yes, we hit a big goal. However, it’s not nearly as fun as I thought it was going to be to be a millionaire or whatnot. Although we’re a little lower given the market right now. But, um, you know, we still have to really carefully manage our budget and now, and like you said in the intro, going from a dual income to half, uh, was quite a shock and it has taken us a year to kind of adjust and I still feel like we adjust every month. It’s like, oh my gosh. Um, so, um, I would like to spend more, but that’s like sort of a long-term play. like eventually I would like to spend more. Currently, we’re where we are. Um, and my questions are around, how do we live on what we’re making and spending? Um, how do we get over the fact that we’re not saving 40 or 50% anymore? And is that okay? Um, I know there’s such a thing as coast-fi. Is that something that we should just accept in this position?
Scott: I I think that’s helpful. And and I think if I were to rephrase, well, well, well, I think I think the best place to start would be to reframe or to restate the reality of your situation real quick, right? You are, you are a millionaire or very close. However, almost all of that wealth is in your home equity or in your retirement accounts with the exception of it sounds like 200 grand in mutual funds at this point in time. So, this this wealth is not generating any material cash flow for your situation. Certainly not more than 10% of of monthly spending in a reliable way. Is that right?
Guest: That’s right. Yes. And and um can I just add on to that? In our current spending or saving, um, it’s kind of a weird way to look at it, but in order to get our employer match, we put a certain amount in to the 401k. So we have as part of our saving, a big chunk going to a 401k and of course, our home principle going into our mortgage payment. So that makes up our savings, which is puts us a little upside down. So if you look at the cash flow, we’re actually sort of funding the savings from our our currently liquid funds, which is around 200 right now. So it’s almost like we’re going even further into that uh, middle class trap, I guess you would call it, where all of your money is sort of locked away until traditional retirement. So,
Scott: Makes sense.
Guest: Yeah, it does feel that way.
Scott: Okay. so let’s go back to income real quick. You said you have a salary of a um Frank makes $101,000 and you have additional income of $24,000. Could you could you um, is there any more nuance to those two numbers? any bonuses for example? What is that additional income?
Guest: Yes, so you mentioned the salary of 101, um and that’s for just the current year. And then the they give you a medical bonus of 1,000. We discovered we have um oil royalties at our current property which was really amazing. So that’s estimated at about 4,000 uh per year and then a bonus of 15 and a 401k match of four.
Scott: Okay, so the 24 is going to be this oil royalty. Never heard of that. That’s awesome. Um, yeah. uh, bonus and then 401k match.
Guest: That’s right. Yep.
Scott: What what I’m trying to understand as well here is we’ve got 100 we got 8750 coming in per month after tax. So you’re funding your retirement accounts and have that all that stuff. And we have spending of 7100 per month. Are you say is that is that accurate or is is is the reality coming out differently? And spending is more or less matching or even sometimes exceeding that that the the the cash inflow from your wage income.
Guest: Well, that’s a that’s a great question. I could admit that this budget is a little bit more, uh, what we would like it to be versus what it is. Um, and so far, like I said in the past year, we have just, it’s like sometimes money just comes in and we can cover the deficits. So we haven’t truly had to sell any mutual funds yet. But when you look at the numbers, that’s what’s going to have to happen eventually.
Scott: with the reality of the situation that I’m hearing is, this is this is an aspirational budget to some to some extent and you’re kind of treading water or that’s how it might feel right now from a cash flow standpoint.
Guest: That is right. That is definitely how it feels and if we hit this budget, it’s like, okay, we’re only going to be upside down this amount. And upside down in that our savings is just being kind of moved around, not that we’re going into debt, but it does feel that way.
Mindy: Okay, and it can feel that way when you’re used to saving so much money and then you stop. But you also had so much more income and that went down. So the amount that you’re saving is going to go down. Um, you mentioned several things. Number one, that Frank would like more time with the kids. Has he asked for a reduced workload?
Guest: No, it’s not something he has yet asked for. Um, it’s just something that he’s sort of building his career experience towards that direction. So he used to be some someone who was on site for construction projects in sort of a management role. That is not something you can do part-time or remotely. So he actually shifted into a role where he could eventually dial it back more. So he has done that. Um, but he’s just trying to build his experience right now, but has he asked for it? No, not yet.
Mindy: Um, one of the things that Carl did when he was getting ready to retire, he wasn’t mentally able to wrap his mind around retiring. How can I just leave this? Like it’s a big step. So he went from full-time to part-time. He asked his boss, can I work three days a week and his boss said, yeah, I don’t care. But he built it up as this like huge thing that was going to be this this this big conversation and he was like prepared for his boss to say no. and then his boss was like, yeah, I don’t care. So, perhaps Frank could work it such that he could do four 10-hour days. He’s still getting all of the time in because really what’s an eight-hour day versus a 10-hour day? You’re already there at work, you know, it’s an extra hour on either side or, you know, four 10s, four nines and then he does, you know, a half day on Friday. Or, you know, something like that. If he could propose several different structures to his boss, maybe his boss would say, hey, that’s awesome. And if Frank’s been there for a month and a half, that timing’s not good. But if Frank’s been there for years and years and years and is a valuable asset to the company, his boss is going to want to keep him. So, you know, that’s a more of a research opportunity for Frank to start thinking about in what ways does he provide value to his company and how can he continue to do that on a reduced workload or reduced days in office kind of thing? Because that’s going to give him a lot of, uh, mental space to help out. And if Frank is staying home with the kids on Friday, then Gracie can go back to work for one day a week or three days a week and the kids are in child care for two days a week. You’ve got another six years until baby 3 is in kindergarten because baby 3 is a November baby, that’s baby 3 starting kindergarten late. I have a November baby. So that is, but that’s only six years and then you can start working again. So it’s not like you’re never going to be able to save money ever, ever, ever. You’re just on hold right now. But then you said you’re a CPA. Holy cow. Everybody I know is firing all of their clients. All the CPAs I know are firing all of their clients because they’re sick of dealing with all of these pain in the patoot clients. You could be the pain in the patoot CPA. I’ll deal with you tough people and I’ll make a lot of money because I only have to deal with 10 clients. And I’m going to do all of your work and here’s the story. and you don’t have to be a full-time CPA to make a lot of money as a CPA. You just say this is what I charge. I’m that good. If you, oh, you can’t find anybody else because you’re such a pain in the butt that you fire everybody’s fired you? Well, now you have to pay my rates or do it yourself.
Scott: When I when I think about your situation at a high level zooming out, I think you’re treading water right now from a a savings position. You are funding the 401k. That’s great and you’re paying down the mortgage. So that those are automatically happening. Um, but there’s not a lot of flexibility in your situation right now. Um, and I’m having a hard time seeing how we can get you to that combination of having more time for both of you with the family and be able to spend more uh at this point in time without major major creativity and big moves uh in that situation. So I think we should go through some of those options, major strategic pivots and then kind of see how any of those feel and whether what what the reality um, what what which which path um, smells right to you um that you’d like to to think about more. So on the one hand, um, like Mindy said, we you’re in a situation where you’ve done a great job saving for retirement. You’re not accumulating lots of cash in your life or invest like spendable cash flow from your situation. But if you want to just chill on your current situation for the next five years um while your kids are are young and entering school and then resume working at that point, um, to to begin accelerating other types of savings, you’d be fine. You’re you’re way ahead of the pack for in terms of retirement savings uh and your financial situation could could easily whether that, right? You’re not going to be able to spend a lot more right now or make big shifts uh unless, you know, maybe there’s some tweaks like a working four days a week like mentioned there. But that’s one avenue, right? Is just, hey, we’ve got a good situation. We’re going to we’re going to hang out here.
Guest: Yeah, to like Coast.
Scott: Yeah, coast by.
Guest: And I I agree. I think right now when I look at it, it’s like, well, we’re set up for traditional retirement. Like we can get all of these things when we’re 59. Um, So, yeah, so I I agree with you that would take a major pivot to do anything right now.
Scott: So so the second the second thing would be, let’s let’s look at our our assets and how we’ve allocated capital to this point, right? And right now, that that has resulted in a situation where you’ve got, you know, 700 grand in stocks, most of which are in retirement accounts. You’ve got three months of spending in cash, uh and you’ve got um, you know, another two another 200 grandish in your home equity with that. right? Now, and and and the framework I used like to think about this is if I were to give you a million dollars after tax right now, what would you do with it? Um, you know, how how would you redeploy that? And that would be a great exercise to think through with Frank and say, what what would that look like? What what I would I be feeling much better if my position looked like, for example, 100 grand in cash, um, and then 200 in the home equity, um, um, 400 in in in uh or 200 in after tax stocks, 200 in retirement accounts and 300 in rental properties uh that that are local. Would I feel better about that position or worse? I don’t know. My preference, Scott, my my preference here would be something that had a higher cash position, probably six months to a year of that cash reserve, um, and that had a little bit more real estate after tax, um, um, um, um wealth skew there and a little less pretax because it just gives me more more flexibility uh and option to make big moves in a general sense. Um, but that’s a personal decision and I think that that would be a good exercise for you to think through. Once you’ve decided, hey, here’s my portfolio look like, then take, okay, in three years, I’d like my portfolio to look more like this and less like my current state, and that will tell you what to do. For example, if you wanted real estate, you might stop contributing to the 401k and piling up more cash so you can invest in that next rental property. Um, for for example, um, or you might keep your current home and move into another property uh to to reposition that home equity as rental property wealth if that made sense. So those would be for that would be one thing, one area to consider. And the last is going to be on your income statement, right? And right now, um, you’re not bringing in a major cash surplus and so you could make drastic changes there and say, how do I, you know, make some serious changes here? Um, is there is there a new way I could reimagine my day-to-day that would enable me to spend, you know, 30% less overall? Can I, is there something I can do with the food budget? Is there something I can do with the the mortgage here? Is there something I can do with transportation in a general sense, although you spend almost nothing there. Um, what what does that look like? uh and maybe maybe we can we we could walk through some of those line items or there’s a move in the place. Which of those feels right to you of those three areas. Coast on your current situation, redoing the the net worth position and reallocating your your capital or focusing on that income statement.
Guest: I definitely think uh, re allocating our net worth position where everything is and originally we had planned, um, we had put more in pretax thinking we would do the Roth conversion ladder, but we haven’t fully stopped working, so it’s not going to happen anytime soon. But I don’t know if I see a way other way to like reallocate our our um, assets other than what you mentioned about stopping the 401k and is it worth losing the match, which it’s 4,000. I mean it’s not like a huge part of our world, but it’s nice to not lose extra money. Is it worth losing that to then redeploy that saving somewhere else that would give us more flexibility? Um, so it’s something to think about.
Scott: Are you maxing the 401k or are you taking the match?
Guest: Just the match.
Scott: Okay.
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Scott: I think that’s yes, so I think that’s that that that is um, that makes sense. And so you don’t really have much to redeploy from a cash flow perspective. It’s going to the mortgage and to the the 401K. So that leaves us with that leaves us with coasting or the PNL.
Guest: Yeah, and our biggest thing is, at least from what I’m seeing is this house, um, it’s a big part of our world right now. So that would be a pretty major uh, thing to change. So I don’t know if that would be worth it. Um, just to give us more flexibility. I mean, and just to be clear, Frank loves the house, he loves the setup, it’s close to his work. He has no issues with any of this. So it’s more of me trying to find flexibility in our spending and in our and where we’re going. I know if I call Dave Ramsey, he would be like, sell the house. It’s way too much of your world, like budget-wise.
Mindy: So, knowing the front-range market like I do, where are you going to go?
Guest: It’s a great question. Um, and actually we were planning to move. So we come from different states. Uh, we don’t neither of our families live in this in Colorado. Um, so we had actually thought we would move closer to family and ended up staying. Um, so there is still the idea that we could move close to family. Uh, one of us has family in a lower cost of living state. one of us does not. Um, so it’s just a matter of now do we do do we pull that trigger? Do we pick one of our families to go live by and is it worth it? Um, to basically location arbitrage uh, our financial position.
Scott: Yeah, well, well that compounding that is probably your incredibly low interest rate on your property that you have right now.
Guest: Yeah, like what we would buy is probably going to not really change or the payment probably wouldn’t change that much. Yeah, I haven’t run the numbers but yeah, you’re probably right. Even in a lower cost of living, I don’t know how much lower of a payment we could get at this point unless we just paid cash for a house. I don’t know if that would give us the flexibility we’re looking for.
Mindy: But in a lower cost of living area, what sort of income can you make? And I believe I know what state is your lower cost of living area and they have very high property taxes. They have very high sales tax. So you are changing your absurdly low property taxes here for kind of unrealistically high property taxes out there. Um, there are like I I don’t know that that is
Guest: Are you talking about Wisconsin?
Mindy: I am.
Guest: Okay, so I actually, I consider that the higher cost of living.
Guest: Oh, okay. okay. Because because of what you’re talking about is the property tax. It’s one of the highest in this country. So we, yeah, it would be very high. And then, but the other option is Tennessee.
Guest: So no state no state income tax, the property tax, I think is right around what it is here. Um, and not we wouldn’t be going to Nashville, so that would, you know, be good because that’s they’re crazy over there, um, like cost of living is high there.
Mindy: I would run some spreadsheets, Ms. CPA. I would look at all of the things, pro and con it and see what are the benefits of moving versus the benefits of staying because Tennessee is actually a really nice state. You don’t have your winters, like I knew Wisconsin was one of those states and I’m like, ooh, Wisconsin’s great, but it’s also like winter last 12 months a year and it’s I’ve lived in Wisconsin. Don’t send me emails about how great Wisconsin is. I know it is. It’s just really hard to live there for like seven solid months. Um, but yeah, I mean there’s there’s a lot of different opportunities. What sort of income would he be making in Tennessee? I’ve never lived there. I’m not sure what their their salaries are.
Guest: That’s a great question. Yeah. And, um, question on that, do you think it would be worth trying to get an offer just to see because, um, yeah, like he’s Frank has never looked. So how do we know? How do we know what you’re going to make there?
Mindy: I think it would certainly be worth a couple of hours of searches on indeed.com to look up, you know, where what are salaries in Tennessee for whatever his job is. I can’t remember what his job is. Um, but, you know, if he’s making 101 here and he could make 30 there, that’s a real easy answer. And yeah, that’s a hard now. If but if he’s making 101 here and he could make, you know, 85 there, that makes the decision kind of a lot more like neck and neck. And then you’ve got family there, which is really valuable. That’s time away that that you can, you know, get a breather.
Guest: Uh, another big part of our budget, speaking of, you know, do we cut our, you know, expenses somehow, a big part of that is travel back to see our families. Like that travel budget is not, ooh, let’s go to the beach and rent a hotel and all this. No, we go stay with our families and it’s basically just airplane rides to get back to both of our families. So, that would be another win if we did that. But, uh, yeah, like it’s a little bit outside the scope because it’s kind of a big lifestyle choice, like, do you want to live here or here? So it’s a hard choice to make.
Scott: Yeah, I I think I think there are definitely I I don’t think there’s an easy answer to any of these things. The easy answer is cut that spending down by 30 or 40% and go to town on that, right? Uh and and that solves half of these problems. That’s a painful methodical, slow grind to do that. And I think that we should acknowledge it as a as as as an answer to your situation that there are probably items to shave and things that you could get um more disciplined on with that. and and really settle on that not not the aspirational 7,100 a month, but but actually bring that down to a reality where you’re spending 4,5 five and a half six grand a month uh and having that net cash accumulation tick back up that will bring flexibility. So I think that that’s that’s something we should acknowledge there because there is no other um major life move that you’re that you seem like really able or willing to make at this point in time on that front. We can get creative about income on those things and we can think about a big move here. But I ask you this, do you like Colorado, um, better than Tennessee or Wisconsin?
Guest: Well, this is part of uh, the problem is that I kind of glamorize moving back to Tennessee. We actually Frank and I met there and we had a great time living there and he just, however, he just had to come back to the mountains, like the big mountains. He had lived here for a short time. So I don’t really care. I think the mountains are great, but I think this area has its downfalls. For example, it’s getting way busier. You can’t really get into the mountains for under four hours some days. So, yeah, like I it’s so that’s another thing where maybe outside the scope of the show where it’s kind of like a marriage negotiation, like where do we live? Um, so there’s that and then of course the culture, uh, you know, I love that everyone out here is so active and fit. That’s an awesome benefit and we would love our kids to be raised where it’s normal to go hiking on the weekend or whatnot.
Scott: And the same is true for everyone in Tennessee. Let me can’t bad mouth people in Tennessee.
Guest: No, but that’s true. That’s true. When we lived there, we had found like the group of outdoors people. So we found them, but you know, it’s not as out here you just go and you’re like being passed on the trail by an 80-year-old and you’re like, oh my gosh, okay. So, I think the idea that I’m hearing that’s sort of coming to mind is maybe we sort of reset another goal of opening up our cashback for a reason that’s not spending, but it’s more like opening up our cash flow to invest in a way that we can later access income, like you said, rental maybe, but and to do that, we would need to cut 30 to 40% of our spending. Uh, question is, how, like what areas do you see, like what are the biggest red flags when you look at our spending that you would just be like, this is get rid of this or work on this really hard.
Mindy: groceries, no questions asked spending and miscellaneous because I don’t know what’s in miscellaneous.
Scott: and groceries for example are 978, miscellaneous is 700 and no questions asked is 973 a month.
Mindy: Yes. So, that is $2700 right there. That’s a third of your budget. I’m making that up, I didn’t do the math, but that’s that’s a third of your budget in three categories. Groceries is going to be high. It’s going to be, you know, I’m struggling. Everybody’s aware that I am tracking my spending publicly at Mindy’s biggerpockets.com/mindy’sbudget. You can see that I am blowing my grocery budget every single month. I am hardly the right person to talk about it about this. But I’m really trying to get my grocery spending under and my kids are 15 and 12 and they eat like linebackers after a game. So, I do think you can get your grocery budget down. Scott, Daphne eats more than you. They’re just hoovers. But I do think you can get your grocery budget down. I’m wondering if you do anything like grocery planning, meal planning or
Guest: I do. Yeah. And like where is that $1,000 going? Is it all organic stuff? Is it like grass-fed Kobe beef and like, is there a reason behind it? Because sometimes people are like, I spent $1,000 and it’s very regimented and it’s just, you know, meal uh, like food allergies and things like that, and some people are like, I just spend it because I have no idea where it’s going. Yeah, and I think we’re like, we’re we’re neither of those. I actually have, starting in December last year, we spent 2,000. Oh, well, that’s great. You’ve done huge improvements. Well, I was like, we gotta, we can’t do that. So I started tracking it very detailed. I won’t bore you with that, but I know exactly what we’re spending it on. Um, I do meal plan every week and we don’t eat out. So we are eating a lot home and um, I will say we have a, you know, three-year-old and 18-month old and gosh, I feel like we throw away so much stuff because they don’t eat what I give them. But I don’t think that’s killing us. Diapers aren’t killing us. So even though I know where it’s all going, it’s like I feel out of control with it still. And I every time I buy groceries, I feel like shocked and and I don’t I definitely don’t know what to do about it. And I even split out supplies and stuff because I was like, I think this is really inflating my number for groceries. So that number is actually just the food. It’s not even, you know, paper towels and stuff.
Scott: I think I think it’s hard and I think that I think that that’s where I think that’s where I think this is really helpful. I bet you there are a lot of people who are feeling exactly the way you do about budgets like this. But I you know, and I again, I don’t think it’s going to be I think that’s why it’s the easy answer is to say, let’s cut back on spending. I get like but we get it, that’s going to be hard. There’s going to be like, I it sounds like you have great command over over these things or at least track it um very thoroughly each each month with that. Um, it doesn’t change that this is a that this is these are the numbers and we have to go to where we think the leverage and the numbers are and there’s no leverage on the income front and we don’t have too many actionable items on the net worth category and so how what can we do here? um on that. And so so I think I think I would like to wrap it up with three big points for you um and for for advice. First, I would sit down and I would model out what is the reality of your situation going to look like over the next three years with a couple of standard assumptions. Spend some time, build up an Excel model, um, or a spreadsheet and and go and say, what’s going to happen to us in three years and five years, uh, in 10 years if the current trajectory holds reasonable assumptions for income growth, expenses, these types of things. And say, how does that change if I was able to make these cuts in these areas? What would have what would have to be the reality? And what does that what does that do to my model uh over in three to five years? What is it what happens if I moved to Tennessee? What happens if we move to Wisconsin? um and for for these areas. And then, using those numbers, I would sit down with Frank and say, what what do we want to do? Like, are things we happy? Do we want to just we want to just um keep hanging out here in Colorado and and and living the good life with with this? Do we want to um move to to to Tennessee? Do we want to go to Wisconsin? Do we want to make some sort of change? And how does that how does that change my my outputs here that I’m that we’re that are going at and and and and what do we want to do? And the the artifact that you should construct there, the document, I think is is the vision, right? It’s a half a page or a page long description of where you want to be in three years and you can cascade the goals from there. And I think that will at least give you clarity where you can say, this is the decision we made and these were the outputs of that decision, what they’re likely to be. And we’re aligned with that. We we can we can live with that. Um from that. And that will help you inform, do I want to go to town trying to find more in my budget? I probably don’t have much in my groceries. is there anything in miscellaneous? Is there anything? Why why am I not actually accumulating the $1600 that my per month that a my budget says we should be accumulating? Am I forgetting a um, an overhead allo- allocation or a capX account um equivalent for our lives um that that should be in that in that category? Or what what is that? Um, you know, so sorry. We have model, we have money date, and vision, right? which we can re- you can just put it as a draft and repopulate it every couple of months until you settle on what you want to do there. And then I think you have your the outputs of that will be, do I want to concentrate on spending? Do I want to concentrate on income? Do I want to concentrate on capital allocation and realigning my accounts? But unfortunately, I think that you have um, brought us a hard problem here where we can have, we can have any of the things you listed, but we can’t have the combination of things that you want without making major major financial and lifestyle changes most likely with that. Um, so I hopefully this this artifact will be the the way to to negotiate or or make those tradeoffs with Frank. How’s that sound?
Guest: I think that makes a lot of sense and really, you know, halfway to our million dollar number, we did realize, oh, I don’t think this is going to be enough. We’ll figure it out when we get there. What to do next. And when we got there and we never figured out what to do next. And so I yeah, I do think that’s where we are kind of stuck is we haven’t done another projection out for, uh, three years, where’s where do we want to be? Now that we’re here, where should we go? It’s more like, well, here we are. So, um, I do think that would be helpful, um, just to run a few scenarios out and I actually really appreciate, um, hearing your thoughts on cutting 30 to 40%. Um, I but one of my thoughts was maybe someone just needs to tell me to get over myself and figure this out instead of just spending and then wondering what happens. So, I’m good at that. I’ve done that for 10 years, you know, I did the payoff and then we did FI. So I’m a little bit, um, throwing a little tantrum inside because I didn’t want to get to this point and have to continue uh, cutting the budget that much, but um, if we can do a three-year model where uh, I see flexibility opening up in the three years, we could do it. I think.
Mindy: Well, how much money do you want to be saving?
Guest: That’s a good question and and that’s where I think we’ll have to look at what our options are. Um, so for example, if we want to um, buy a property, I’m just going to throw that in there. I mean, we haven’t fully talked that one out, but if we wanted to buy a property that would increase our cash flow in three years or a couple of properties, I don’t know, anything, but um, then that would help us back into how much to save above the 401k and so that could give us a new saving goal. So, I guess right now, we don’t really have a saving goal. It’s like, okay, save enough, hit the match, and then our force home principle, and so we have no other goal right now.
Scott: Personally, I I reread said for life. So I guess that, I guess that is a shameless plug in this particular uh uh uh show, but you know, I I’m going back and rereading that and I’m like, good God, what I was five years ago, six years ago, I was another person. I was spending only this much. Every day I was doing this. I was reading a book every like two days on this. Uh I was working out five, six times a week. Now, I I look in the mirror, I’m like, I that’s what two beers a night, you know, three nights four nights a week have done to your stomach there. That’s what this is like and it just kind of gave me a kick in the pants personally like to to reignite like what was I doing four, five, six years ago? Uh and I slowly drifted away from some of those things to to get into this spot where I’m not really feeling about like like you know, as good about some of those things. and I wonder aloud if maybe some of those things may have happened in your budget um to a certain degree. Not not obviously the the you know, the you know that clearly does not apply. But but that that’s like kind of perhaps, you know, put it put them on Stardom and then pick one and fix that one. and then pick another one and fix that one. and pick another one and fix that one. And and give yourself permission to have it be a six month or a year process to do it. um, because it’s not you’re not going to be able to go cold turkey and cut all this stuff out. But perhaps that would be a good way to to attack the the challenge here and you know you can do it because you’ve been there. Um you’ll never get quite back to the financial shape you were in before you had, you know, two kids, soon to be three and all these other things going on, but perhaps you can, you can, you know, say, I’m I’m going to buckle up here and and figure out a couple of these points bit by bit and make it a point of pride to get to where old Gracie would have been very admiring of the the the discipline that that’s that’s in there, you know, five, six year later. so,
Guest: Great, love the motivation. Yeah. We need it.
Mindy: Awesome. Well, Gracie, thank you so much for sharing your story with us. I thought this was a lot of fun, and I really appreciate your time.
Guest: Thank you so much. So helpful.
Mindy: We’ll talk to you soon.
Guest: All right, bye.
Mindy: Okay, Scott, I think that the only piece of advice we didn’t give Gracie was maybe she should try winning the lottery, which is actually a really crappy advice. I like her story. She has set herself and her husband up in a good financial position and I think now you said it pretty succinctly. She’s got three options to choose from. Which one does she want or which combination does she want to use, which combination of levers does she want to use to move herself forward?
Scott: Yeah, and and one thing we talked we didn’t touch on during the show, but we talked on a little bit afterwards in the post-recording, was this concept of maybe earning more income. Um, perhaps with her tax background, there are seasonal parts of the year where she could work um, and and hire out child care during those periods of time. um, and and that might help her bring in some seasonal income that might be very high dollar per hour, for example. So, a couple of options we one option we didn’t discuss in the show, but we want we wanted to call out there. Uh I think that the reality though is that it’s a hard hard a tough situation um from that. Uh it’s it’s a tough mental situation. She’s obviously done really well and has won in some ways. She’s a millionaire. Um, you know, uh and and and and probably is set from a coast-fi perspective, but, um, you you we we we couldn’t find a way to say, hey, you can, you know, here’s how to stay home or have both of you guys stay home. Here’s how to have enough how’s to spend more uh in a general sense and here’s how to accumulate more wealth and produce flexibility. She will have to go and and kind of make a make a determination along with Frank about what they want a few years from now and in the present and be realistic about what will happen if they choose those paths and then live with those those choices. So, um there are a number of good ways to approach things, but none of them get all of the things that we want um in the in the from the goals that that she stated at the beginning of the show. Hopefully it was still helpful for her and Frank, though.
Mindy: I think it will be. Yeah, I think they have a lot of uh things to talk about. And, you know, what they decide today doesn’t have to be the only thing that they can do forever. Let’s make a plan. And I think that they have been really good at creating a plan to get her out of debt and creating a plan to reach FI in six years. That’s awesome. And creating a plan for this. But then, I think that they don’t currently have a plan and that’s where they are needing to work on. So, I think you gave some great ideas and I would love to check back in with her in about six months and see where they uh pivoted to.
Mindy: Okay, Scott, should we get out of here?
Scott: Jinxed.
Mindy: From episode 324 of the Bigger Pockets Money podcast. He is Scott Trench and I am Mindy Jensen saying see you in a shake, Garden Snake.
