Mindy: The financial independence community is filled with stories of young people who have reached financial independence and retired early. But what about boomers? Or Gen X? Today, we are going to arm you with the four steps you need to know when you’re getting a later start. Hello, hello, hello and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen and with me, as always, is my young-at-heart co-host, Scott Trech. Bigger Pockets has a goal of creating 1 million millionaires. You are in the right place if you want to get your financial house in order because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting, even if you’re getting a later start on your financial independence journey. Today, we’re joined by later start experts, Jackie Cummings Koski and Bill Yount, hosts of the podcast Catching up to Fi. We’ll be talking about everything from backwards budgeting to social security. This episode is the 101 level, talking about the foundations you need to support your later start when your runway is a little bit shorter. Jackie and Bill have so much to share that we’re bringing them back on episode 538 to share 201 level, the tactics to help you reach your financial goals.
Scott: Today’s show is sponsored by BAM Capital, your path to generational wealth with premier real estate investment opportunities. See why over 1,000 investors have invested with BAM Capital at biggerpockets.com/bam. That’s biggerpockets.com/bam.
Mindy: Jackie Cummings Koski and Bill Yount from the podcast Catching up to Fi. Welcome to the Bigger Pockets Money podcast. I am so excited to talk to you guys today.
Guest 2: Oh, it’s great, Mindy. Thanks for having us on the show.
Guest 1: Yeah, we’re glad to be here. You know, catching up to Fi is like been, uh, Bill developed it. We’re making it even better because there’s so many late starters, so we are thrilled to come and chat with you guys today.
Scott: Gen X is behind on retirement. The average Gen Xer has something like $40,000 saved for retirement. So it seems like most people in that generation are getting a very late start. There’s a lot of reasons for this, but Jackie, can you give us your thoughts on that stat? What is going on here? Why are so many people getting started late?
Guest 1: Yeah, I I think that that stat is right on. And um, it’s not just, you know, the Gen Xers. That is the biggest chunk, but things like, uh, if someone immigrated to this country, that could get them a late start. Sometimes divorce, uh, even kids sometimes can cause people to get a late start. But we tend to end up in this, you know, uh, late 30s, 40s and 50s when we’re just waking up. Like for me, I just woke up at 38 and some people might not consider that late, but I knew I was way behind. So when you’re finally waking up because you didn’t get the stuff early on, that gives us a late start and then for me especially, I was running really, really hard to try to catch up and I ended up getting, you know, having a late start but finishing a little bit early. So there’s a whole lot of people in this bucket of late starters.
Scott: Jackie, one of the things that we see in bigger pockets when we’re talking to people about their money story to early financial freedom is this concept of the aha moment. Oh, I discovered that I could retire earlier, build wealth, and then a very dramatic behavioral change that incorporates saving, investing, building one’s financial position. Is that what you mean by wake up in the context of moving towards retirement?
Guest 1: Yeah, I do because for a big chunk, you’re just sort of floating through and doing what you’ve heard other people say or maybe having the wrong role models around you. But when finally you get curious, you start digging, you start educating yourself and things start clicking, you’re like off to the races. And I know for me, once I found one nugget that was helpful to me, I wanted to keep digging and digging and digging and finding so many other things that helped me and and I’ll tell you what, there’s a unique type of motivation that you have once you get going. And so I tell people all the time, you will surprise yourself at how fast you move once you wake up and you start seeing that some of the things that you’re doing different after you wake up, looking at the movement, that is so much more motivation for you to keep going, to go faster, and before you know it, you’re way further along than you thought you ever could be even if you got a late start.
Mindy: Absolutely. I could not agree more with you, Jackie. And what I think a lot of late starters uh maybe don’t know or don’t really focus on is there are some advantages to being a late starter. There are some uh some opportunities that they have that their younger counterparts don’t and we’re going to get into that a little bit later. Um but Bill, I’ve heard you say the average American is a late starter and I love that because it’s so inclusive. The the, you know, you see these articles that are written about, you know, the 25-year-old that got to financial independence in two minutes. Yay for him, but that’s not the average person. That is absolutely the outlier. But when you see so many of these comments over and over again, you start thinking, oh, maybe something’s wrong with me because I’m 50 and I and I’m not retired. So I love that I love that phrase, the average American is a late starter.
Guest 2: Well, you know, I don’t know how I come up with that, but it seems to ring true, you know, in our audience and our show and our podcast, um, they all wonder what happened. You know, you get caught up in life. You get caught up in the funnel of life. Uh, you come out of school, you come out of residency, you have big debt, you start a family, uh, you buy a house, you buy a car, and then you get into this paycheck-to-paycheck lifestyle and all of a sudden you’re 50 and you’ve lived life, but you wake up and you go, wait a minute, nobody’s taking care of me. I have to take care of myself. and I better get started. Uh and getting started is really the hardest part and as Jackie says, once you dive in, it’s amazing how fast you can turn your mindset around and turn your money around.
Scott: So we haven’t even gotten to the steps here to actually address going towards, you know, like catching up to retirement and beginning to to move our financial position forward, but I think these are two critical precursors here. We can call them, you know, 1A and 1B on this journey. One is wake up and acknowledge like, hey, this is like an important part of life and nothing’s going to come and save me. I got to go and go after this and get this done. And two, um, you know, like rationalize or understand or empathize that you’re not going through this alone. This is most people are kind of in the same boat as you when you’re maybe getting a late start and trying to catch up to retirement. How am I doing there? Is that would you agree with that as like step 1A and 1B here before we even get into the actual work of moving our financial position forward?
Guest 1: Yeah, for sure. Um, I think you you hit the nail on the head. You know, it’s just kind of, you know, waking up, acknowledging, you know, you didn’t know these things and just moving on. The acknowledgement part is really important because, you know, if the mind isn’t there, it’s hard for you to get your feet moving.
Guest 2: And then when you wake up, you feel like you’re alone. I mean, you think you’re the only person in the world that has done this. And, you know, that’s why I call it the silent majority because it we live in a consumption society. We live in a society that is not, you know, promote savings, it promotes consumption and spending. Uh it’s almost an afterthought in our society.
Mindy: Yeah, you are not alone. We are here with you.
Guest 2: We need to tell Mindy not to give up her day job. Is that right? You’re such a great podcaster.
Scott: That’s the new intro music for bigger pockets money. We’re putting that right in there.
Mindy: Bigger Pockets music. Yes. Uh not high school musical, Bigger Pockets musical. But you aren’t alone and these headlines that you see, these sensational headlines absolutely make you feel like you’re alone, which is why I love the catching up to Fi podcast so much because you’re sharing stories of people who are doing it, who have done it with a later start.
Mindy: What would you say Jackie to somebody who reached out to you and said, Jackie, I’ve heard about this concept of financial independence. I would like to do it, but I’m older. What is my first step?
Guest 1: Yeah, to me the first step, we we talk about the psychological part. I like to say give yourself a little grace. It’s it’s prob a lot of the reason why you’re getting a late start probably is not your fault. We’re not taught about these things. It’s a taboo topic and even schools don’t teach it. A lot of us didn’t have good role models at home. So just give yourself a little grace, okay? Once you do that, you have to know where you’re starting. Like, how can you even decide, okay, should I start kicking up my investing first? Should I pay off my debt first? You don’t know which piece is really more critical until you start laying out your finances and determining, uh, like what your numbers are, things like, you know, your net worth, you know, maybe your fi number, which is 25 times your expenses, um, you know, what what’s your true income? You know, what taxes are you paying? Uh so all those things are important to see where you’re starting. I know there’s that inclination to let’s just do it, uh, all at once at the same time and just get, get going so quickly, but just figure out where you’re at and lay things out so that you have a very clear picture of where you’re starting because as you see progress, it’s gonna be really, really valuable to you to see where you’re starting. Even if your first net worth is in the red, if you start to see it moving in the right direction, it it’s motivating and you can see that you’re making progress. So that’s how I would get get it started.
Mindy: Yeah, even if your net worth is in the red, you need to acknowledge that. That is what I call a fact. It is not judgmental, it is. I have brown hair, Jackie has black hair. Those are facts. I have X number of dollars, I have negative X number of dollars. Those are facts. So once you have an idea of where you’re starting, you’re that’s so I love that because then you can move forward. I don’t know how much my net worth is. Well then how much are you spending? How much are you budgeting? How much, I mean, you don’t even know how much you’re budgeting until you start tracking your expenses and see where it’s going. Um, but yeah, so so Jackie, this is awesome. I’ve given myself some grace. I have I want to diagnose my starting point. How do I do that?
Guest 1: Yeah, so um as as we some of the numbers that I mentioned, you can’t even get to until you do a budget. Now that scares a lot of people and a lot of people hate budgeting. I personally, I have to admit, I’m not one of those that love budgeting, but you have to know how much your expenses are. So what did I do? I did the backwards budget, which I kind of think is better. I Bill may disagree with me because I think he does a much better job of the budgeting piece. I do it backwards because I think that leaves less chance of something being left out. So here’s how the backward budget will work. Basically, you take everything that you’re saving and investing, and then you take everything that you’re paying in taxes, and whatever’s left, that’s your expenses. Now, if you do it the other way, we’re going to forget stuff. Like, did you include the dog grooming? You know, did you include, you know, fees for this and fees for that? And I think there’s so much more room to forget things in a budget when you’re doing it the front way, sort of doing line item by line item, inevitably you’re going to forget something. By doing it backwards, you probably include the most your budget can be once you subtract out the taxes and your, um, and your investment and savings. So what, I don’t know, Bill, what do you think? You’re pretty good with budgeting, way better than me.
Guest 2: Well, I actually do it the exact same way. Uh, you know, I save till it hurts, uh, maximize my savings rate or the gap, and then, you know, everything else is spending, but I got to spend on a value-based method. You do have to track your expenses because there’s a lot of little things and big things that uh you can get wrong and, you know, you can have a lot of holes in the bucket that you’ve got to plug as well.
Scott: I I I just want to observe here that, um, I’ve been, you know, tracking my finances and and my net worth, uh, for 10 years here, pretty regularly. And this is not a fun task for me. I don’t enjoy it. It is a large amount of work to tabulate my expenses on a regular basis, plan for consumption, investments, taxes, those types of things. It doesn’t take me 10 hours a month, but it takes me two, um, and it took me a couple to get it set up and it was confusing and painful and those types of things. Is that what you guys found getting this started and and how you find it going forward? Or is there a is it much easier than that? Like, I guess I’m I’m wondering, I think for someone listening, this sounds like a lot of work. It sounds very painful to acknowledge reality and it sounds like something I have to keep up with for the next 10 years. Is it really worth it in your view?
Guest 2: No, it’s absolutely worth it. And I made it easy for myself by using a couple of apps and if I may, uh, plug them a little bit, I use Monarch Money and I use Empower. Uh, I use Empower to track my net worth and Monarch Money to track my expenses. It makes it easier. You do have to want to plug your accounts in and you have to be comfortable with that. But, uh, you get reports and you can find the holes in the bucket, uh, and you know, find a way to maximize your savings. And the reports are very helpful and I look at them on a monthly basis and I go, oh my God, there’s an unexpected expense, that may I may have been hacked. And then there are ones that I’m like, I don’t use them anymore. Uh, so, and then the net worth piece, Empower is really powerful, uh, and it’s fun to look at. I look at it more than I probably should. People talk about monthly, quarterly or even annually. It’s often times you’re better off stick once you get your plan together, sticking your head in the ground and not looking at it and then 20 years later, you have a massive amount of money, but that’s what my sister did.
Scott: And and just for the record, Monarch is about $100 a year as a subscription. So that would be an expense that one would incur, but I also heavily recommend Monarch. Empower is another great tool. I don’t use that one personally, but that one I believe is free for users. Is that correct, Bill?
Guest 2: That’s correct and you’re correct on the monarch expense as well. It’s you get it back in spades if you spend that on a an app like that. Um, and uh they do sponsor our show. So maybe I can help you out.
Scott: Oh yeah. Please give us a ninja because I love monarch. Yeah, that’s free that’s free for monarch. Yeah.
Guest 1: And another thing you guys, like as far as like, you know, keeping up with your expenses, we’ve got the app so technologies there in our favor. but remember, it doesn’t have to be anything complex. So you may use a yellow pad and paper. I use a spreadsheet um, for a lot of tracking a lot of my, um, not just my expenses, but my other financial life. and I’ve been, I’ve been doing that for like, you know, 15 or 20 years and I’ve customized it like crazy. so I would be totally spoiled and anything else that I use, I don’t know if it would, you know, be satisfactory enough because I’ve, I’ve customized it so much. So no matter how you do the expenses and the budget. In particular, if you’re just starting and you feel like you’re going to have to make some adjustments, having that, um, those expenses and the budget in place is going to be helpful for you to identify areas that. And I say adjustments and not cutting because you can save plenty just by making some tweaks here and there, you know, like Bill was saying, you know, the value spending where you’re like, you know what, why am I spending, you know, this much on my Netflix? I am, you know, busy with my business. I haven’t watched it in six months. So little things like that, um, up to the big things, like, you know, maybe not right now, but you know, back in the day refinancing your house, you know, made a big deal or maybe you’re in a position to pay your car off when it has a high interest rate. So there’s so many, you know, changing insurance companies. So just don’t forget about the, uh, ability that you have to, um, make adjustments versus just cutting out things. You know, don’t do things that are not going to make you happy. Don’t do things that are going to make you miserable. That is huge because if it makes you miserable, you’re not gonna stick with it.
Scott: Yeah, so Netflix just canceled their sponsorship with money based on this one. Um, but I think, but the bottom line is like there’s all these tools. Spreadsheets great, pen and paper is great. Monarch’s great, empower’s great. There’s always a new one popping up that’s got a new experiment. Just do the work which is not fun work at first and will be very painful for someone who’s starting out late to see bad numbers maybe on the page, but you got to stare them down, do the work, get this thing, get it, get it over with and then continue to do it and and and come back to it every month, every quarter, whatever the cadence is that’s helpful for you because it’s so critical to understand where your numbers are and where you’re where you’re at, where you’re going at the highest level, um, in order to get started here.
Scott: All right, step 1A, wake up. step one B, give yourself some grace. Step two is diagnose. When we come back, we’re going to talk about how to analyze those numbers and make decisions based on them.
Mindy: Welcome back to the show. Let’s talk buckets and goals and how you can incorporate them into your journey.
Scott: Jackie, Bill, now that we’ve got this analysis done, this slog of at least several hours and probably a few, you know, a month or two that’s gone by for us to collect some data and understand our financial position. What do we do with this information?
Guest 2: You know, first we pause and as I say, then we plan and this is the planning phase. And after the plan, only after the planning phase do we pivot and take action. And as far as the planning phase, you got to look at your cash flow, uh is one of the first things I think you’ve got to know what’s coming in, what’s going out all the categories and you know, you’ve got to start creating your cash flow waterfall. But to take a step back first, I think everybody should make an investor policy statement. They have to go through because your financial life isn’t just the numbers up front, uh your budget and whatnot, you’ve got to plan for insurance, you’ve got to plan for an estate plan, you’ve got to plan for several things in your financial life and there are formats out there where you can go through this. You’ve got to think and you don’t know where you’re going, uh unless you have a map and you won’t reach your goal without a map. So I think the investor policy statement is important and then I went into cash flow.
Scott: Okay, so step three here is make a plan, map out a plan. And it makes sense why this is coming after the previous step because we need to know where you’re at. You are here before you can make a plan to get somewhere else, right? And so I I love this. You said an investor policy statement, you said a will, what are some other components of this plan that you think are critical Bill and Jackie?
Guest 1: Oh gosh, there’s so, um, and I don’t want to say there’s too much and the whole key is that you don’t have to do it all at once. You don’t have to do it all in one day. Um, I like to be able to sort of take a moment to to dream to think about like what you want your life to look like. Um, you know, sometimes we are in a terrible job where we just want to get out of it or whatever and maybe that’s our reason for wanting to, you know, do something different. But you could think of things like, hey, I just want peace of mind. I don’t want to punch someone’s clock every day. I’ve always had a dream that I wanted to, you know, educate people on their finances or whatever that is because in your head, if you have some idea of what you want to move towards and the stuff that you’re like, no more. That could be a lot of fuel for you wanting to make these changes. And sometimes it does help to write down these goal, not just the tangible goals, but the intangible goals and that makes a difference as well. So I would definitely keep something like that. You know, some people call it a vision board or something like that. but, but kind of, you know, have your little dreams and and the things that you want to move towards.
Mindy: So, Scott said something that I thought was really uh important for people to hear. If you’re on this later start journey, this is not a five-minute exercise. Scott said this might be a couple of weeks or a couple of months that you have taken to start off looking at your starting point, diagnosing your starting point. Um this this dream and plan and goal section is also not a five-minute exercise. You want to take the time to really think about it. And this is all of this is a fluid document. This is not, well, I said I was going to do this, so I guess that’s all I get to do. If your goals change, if your dreams change, change your document too, but I love that you’re writing this down. I love that that an investor policy statement. Um that’s so important and this your dream statement, your, you know, all of these need to be, uh, need to be written down so you can come back and revisit them because I don’t know about you, but I’m over 50 and things fall out of my head.
Guest 2: I actually just brought up my written financial plan for Karen and Bill. And uh, the components of it are fairly straightforward. You know, I we outline our present Nest egg and our present net worth. And then as far as the goals go just like Jackie, you know, you have to have your personal goals first and as far as things like your financial goals, I mean, we said our investments will provide an income of $160,000 while still growing at the rate of inflation, providing us with financial independence by July 4th, 2028. I mean, you’ve got to be very specific. Uh, and we’ll reach a net worth of X. And then we talk about our savings goals and then all the insurances that need to be in place uh to protect you. You’ve got to play defense before you play offense. Most people want to play offense.
Scott: I love this and just to share how aligned I am with this. Every quarter, starting on our honeymoon. Uh, my wife and I have a little vision document. It’s just a piece of paper. There’s nothing fancy to this. This isn’t part of my $500 goal setting retreat summit program or whatever. This is just like a word document, right? And we write down 10 things we’re grateful for after a cup of coffee and a workout. We then we write out what our life looks like at the end of 2025 in this one and then 2028, just two, two and five years and we say, we live here. This is what our day looks like on the weekdays. This is what our day looks like on the weekends. This is what our physical health looks like. This is what our family life looks like. This is what, you know, uh uh we do for fun here. This is what our career outcomes have been, those types of things. We just write that down and we we’ve edited it every quarter for the last eight years or, you know, many years basically, uh on this thing and it moves a little bit. That’s okay, but we know we know where we’re going and it’s stopped moving quite as much in the last couple of years as we kind of really locked in like, yeah, that’s what we want. That’s what we’re going to work towards. And that dreaming exercise for us works really well. There’s so many different variations of that that you can do, but it’s just a piece of paper. I would encourage you if you’re going to do this exercise to do it when you’re feeling good. This is not an activity to do, you know, after a really hard week on Friday after four glasses of wine when you’re really beating yourself up. This is an activity to do on Saturday morning after you’ve had a nice workout and your cup of coffee and the sun, the weather is nice and the sun is shining and you’re feeling good and your spirits are high. But I don’t know, I don’t know if you guys had any reactions to that or agree with them.
Guest 1: Yeah, no, I love all of that, Scott. I mean, all of that is so amazing and and you and Bill are making me realize I need to do more writing things down, but the whole key is it’s not written in pen, right? It’s in pencil where you can make changes, you can make adjustments, you can tweak it. We weren’t taught how to put this stuff together. So give yourself a little bit of grace, a little bit of a buffer to be able to work and massage these to make sure that it makes sense. And I feel like the trial and error is really valuable as well because you’re gonna learn something about yourself every time you make a change.
Scott: Absolutely. And and a correct tip here, if you have a significant other, it is always a good idea and you come to them with this. It’s a good idea to label it draft for the first time. um on there that will that will help a lot of things uh in that first conversation.
Guest 1: Yeah, and just to be clear. So everybody here is partnered up and married. I’m the only single person here, okay? Uh, I I got divorced, you know, and most of my fire journey has been uh since I got divorced, I have one daughter. So situation is a little bit different, but there’s plenty of single people that are late starters and part of the reason is they might be divorced or they went through some relationship issues or there’s so many different reasons, but whether you are married, partnered up or single, apparent or someone with no kids, these same things apply.
Guest 2: Yeah, I mean in our community, um, we have a large Facebook community, 75% of them are women and a lot of them seem to be divorced, you know, financial catastrophe and they’re very engaged, very motivated. There is a large female component to this. Maybe men are more ashamed and maybe the women are more able to embrace their mistakes or challenges and move forward positively. I don’t know, what do you think, Mindy?
Mindy: You know what, I see a lot of women now taking control of their finances and this has been a man’s game. Oh men take care of the finances. My husband does all the work, my husband, like I hear that a lot and I see a lot of women either through divorce or just simply wanting to do it, being empowered to do it and say, I want to learn about this. I am going to fix my finances so that I’m not going to fall under that other headline that we see so much, oh, you’ll never be able to retire ever. And um, I think that ties back into step one B, which we kind of glossed over and I’d like to focus on that for a minute. Give yourself some grace. I’m looking for tips for people to help themselves come to terms with the fact that they weren’t perfect before, that is also a fact. We’ll just put it over here. You weren’t perfect before, now we’re gonna fix that. How do you give yourself some grace?
Scott: Awesome. So, we’ve got a wake up. We’ve got give yourself some grace. We’ve got diagnose a step two, dream and reflect. And this is all the soft stuff that absolutely has to be done before you can actually make a hard financial plan and start determining how you’re going to allocate your capital that you have if you have an investment portfolio or resources today and how you’re going to allocate the income streams that are going to come into your life, which is what we’re going to really get into very prescriptively the next on the on the next show here. Bigger Pockets money podcast, 538. So, thank you so much. So we’ll see you in a few days.
Mindy: All right, this was part one. Make sure to listen to episode 538 where we’ll be back with Jackie and Bill to talk strategy for later starters and some of those fire levers you can pull, especially if you are getting a later start. My name is Mindy Jensen, he is Scott Trench, saying, later start, don’t worry, pop tart. Bigger Pockets Money was created by Mindy Jensen and Scott Trench. This episode was produced by Eric Katson, copywriting by Calico Content, post production by Exodus Media and Chris Makin. Thanks for listening.
