Speaker 1: Welcome to the BiggerPockets Money Podcast, Finance Friday edition where we interview Sam and talk about finances after a career change and a divorce.
Mindy: Hello, hello, hello. My name is Mindy Jensen and with me as always is my Maverick co-host Scott Trench.
Scott: Thanks, Mindy. Great to be here and we’re going to save Sam from the danger zone and his finances. Mm.
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 are starting. So arm those doors and cross check for something because we’re going to take off.
Scott: That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business or build out your financial runway for a soft landing. We’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.
Mindy: On today’s episode, we’re playing a little game. It’s called Count the airline puns. See how many you can find. Scott, I just joined an indoor soccer league.
Scott: That’s awesome. Did you, have you scored, are you the goalie or what what what position do you play?
Mindy: I play over there. I have no idea. I don’t know the rules. I got, we had our first game. I had my first game on Sunday and I was like, I don’t remember the rules. I think that I haven’t played longer in longer amount of time than everybody else has been alive on my team. So, um, I play in the back. I haven’t scored any goals yet, but I’m having a lot of fun. And I’m so sore.
Scott: I got to do that. My my dad plays in a soccer league as well and he’s uh, uh, he’s always telling me about these crazy goals that he gets on, you know, I got I kicked the ball through between the legs, nut making, this guy, you know, he was 24, you know, so yeah. I got to try that out. Sounds fun.
Mindy: The next time your dad comes to visit, maybe he can give me some tips because I have no idea what I’m doing. We have an awesome goalie, which is why we don’t lose.
Scott: I love it. That’s awesome, Mindy. I I I need to again, I need to kind of a fun hobby. My my recent one has been hot yoga.
Mindy: Hot yoga. I just
Scott: I never pictured myself as a hot yoga guy, but it helps my back. Feels good. Sweat it out.
Mindy: Yeah, that sounds like zero fun. Yeah, that’s it’s like 105 degrees in the room, right?
Scott: Uh-huh. Yeah, I lived in Arizona, no thanks.
Scott: There’s usually like a, uh, eight women and two men, but I’m I’m cool with that. I I I love it and uh, I think I think it’s outstanding. I use core power down here in in Denver.
Mindy: Well, I am glad that you enjoy hot yoga.
Scott: Thank you.
Mindy: All right, Scott, we have a new segment on our show called the Money Moment where we share a money hack, tip or trick to help you on your financial journey. Today’s money moment is if you’re looking for a side hustle and are in good health, consider donating plasma. You can make anywhere from $360 to $1,000 a month through your donation.
Scott: Hard to achieve financial freedom without blood sweat and tears, Mindy.
Mindy: That was a good one, Scott. If you have a money hack tip or trick that you would like to share, please email moneymoment@biggerpockets.com.
All right, before we bring in Sam, let’s take a quick break.
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Mindy: And we’re back. Today we’re speaking with Sam, who is an airline pilot. Sam struggles with the line between frugal and cheap. You and me both, Sam, and is considering a move to be closer to his daughter and is also looking to start investing in real estate. Sam, welcome to the Bigger Pockets Money podcast. I’m so excited to talk to you today.
Guest: I am excited to be here. I appreciate the opportunity.
Mindy: So, Sam, let’s jump into it because we have a lot to discuss. I’m showing a salary of $3,800 a month and that’s after your 401k, your taxes and your all the other deductions that come out. I see expenses that total $1,700, so that’s clearly not where we need to focus. The delta between your income and expenses is $2,000. You’re doing pretty good. Investments total $125,000. And Sam, how old are you again?
Guest: 33.
Mindy: 33. So that’s not a bad net worth. I see debts of $48,000 which include a payment for a personal loan to go to flight school. So I think that that’s kind of okay because you took out a loan to go to school just like a lot of people take out loans to go to school. I’m not seeing a huge problem in your overall uh, net worth which we’re going to ballpark around $70,000. What can we help you with today? What do you think your biggest pain points are?
Guest: Yeah, I’d like to discuss the the two sides of of of of having wealth, building wealth, keeping wealth because yes, it’s great to to amass all this money and I and I’m really um excited how my net worth has grown over the last several years. Um, but then maybe a little too much. Um and I think that there’s a fine line between spending all your money and saving all your money and I think I’m maybe too close to the saving all your money and I don’t want that to affect my personal life and my relationships. Um and so it’d just be interesting to kind of get your all’s perspective on that while still making sure that I’m saving, you know, enough for my financial goals. Um but then also, I’d like to discuss uh potentially buying some a house hack essentially um trying to decide between a house hack and renting given the constraints um that I that I face with my career but also with my family life.
Scott: Would you mind giving us a quick overview of how we got here? brief history of your money story?
Guest: Yeah, sure. Um growing up, I was unknowingly very lucky. Um I never really had to think about money. There was always plenty of, you know, food on the table. I had all of my needs and wants met. Uh we took frequent vacations, you know, at least one or one or two a year. I’d say we were like solidly upper upper middle class. Um but I did not really understand how much my parents made. Um and my mom raised us. She she was a nurse prior to my and my sibling’s birth and then she was a stay at home spouse. Um and when it came time to apply for college, I applied for the FAFSA and one of the questions was, what’s your household income? And I just remember asking mom what Dad made and she said, you know, I really don’t know. Um and that kind of that really just always stuck with me. Um so I think I grew up with money hidden, but because it wasn’t an issue, I never felt the effects of that. Um fast forward a little bit, I I ended up marrying a physician and that came along with medical school student loans. And those totaled around $225,000 or so. And we had decided to start a family and I was a stay-at-home dad. Um and a lot of my time was spent thinking, how in the world am I going to help pay all these off in any reasonable amount of time. And so that was like the first time I really started thinking about finances and coming up with a strategy and a game plan. So I started looking at all the available resources online, of which there were quite a few. Um then fast forward another few years, unfortunately, I was kind of blindsided by a divorce and when that happened, I I was a stay at home spouse so I didn’t really have a career to fall back on and I had to kind of figure out life on my own. Um and so I became super invested and I I kind of had to make it. Um and so I put a plan in place and that’s worked wonderful so far, but now I just want to make sure that it continues to work um as well as it has been, you know, in the upcoming 5, 10, 15, 20 years.
Scott: So, walk us through how you chose, why why you chose to become a a pilot and how you went about that process.
Guest: Um, because so my both of my parents are in the medical field. My ex- spouse is was in the or is in still in the medical field. And so that was an option that I had considered and I worked in the medical field as well, um as a emergency physician scribe as well as a nurse’s aid. Um and that was definitely an option to potentially go to medical school. The the other one was going to aviation school to be a become a pilot. I had a German foreign exchange student who lived with me in high school for a year and he ended up becoming a helicopter pilot. And my best friend from high school, um ended up becoming a pilot for the Navy. And so I had these these two pretty influential people in my life go through that. They they just they loved it and I thought, well maybe I’ll like it too. And so I just I really randomly called the airport and said, is there anybody near me who does uh um flight lessons? And I got the phone number and I called and the guy said, yeah, can you be here in 20 minutes? And I went up and I thought, man, if I can make a living just sitting in the front of a plane, flying people around, that would be fantastic. And I just kind of stuck with it. Um and kept after it and some opportunities fell in into my lap, um as well as some really hard work, um and now I’m here where I’m where I’m at today.
Scott: So walk me through how much a a pilot makes because I I look I I I was looking it up and it looks like the range is between $50,000 and $900,000 per year. So how do how do I make sense of that range for a US airline pilot and and what do you expect to happen with your income over the next few years? How long you’ve been a pilot? That’s like six questions at once.
Guest: Yeah, it’s it’s actually it’s even, it’s even bigger than that range that you you said. I made a lot less than 50 my first year. I made about $28,000 my first year as a professional pilot. Um and that’s immensely um greater than what it used to be a decade ago. It used to be you had to be on, you know, um food stamps. Um and that’s no joke. you were making minimum wage um or thereabouts uh, up to, I know, I know that there are some pilots from airlines that make over a million a year. So it’s a huge range. The way it typically works is the smaller the airline that you fly for and if you are a first officer or a captain. So when I started out, it was a tiny airline with really small prop planes that we flew nine people on. I was a first officer. I made the 28,000. Now I fly for a major airline. I’m still in the right seat, but because now I’m flying big jets, my salary right now I’m on track to make about 110 to $120,000 this year roughly.
Scott: So walk me through how that translates to $3,800 a month after taxes.
Guest: Well, it didn’t it didn’t get to to that initially. Like I said, initially I I was making like 20, $28,000. Um, my expenses at that point were about 15 grand a year and I saved the other 13 grand or so. Um, now, uh, major airlines have really good benefits. It’s one of the one of the best professional reasons to fly. Um, I mean, I think every pilot likes it personally, but there’s a lot of benefits other than that. One of is is the wonderful 401K. I’ll call it a match. It’s not really though, it’s a non-elective contribution. And so 16% of my salary goes into my 401K as as the employer contribution, which is unbelievably good. Um, I go ahead and I I’m just planning on max that out. So 25% roughly of what I make now will help me max that out on the employee contribution um side. I have access to the HSA, um which is my first time having access to it. So I was able to because I started last year, I was able to contribute the full 3650 for 2022 and then I just dollar cost average um to to do the 3850 this year. Um and then let’s see, is there any other investments? I I I I did start contributing to a brokerage account when I felt like I could when interest rates were low on my loans, I thought it’s going to be a better return on investment to to start an after tax brokerage account. I’ve since stopped that and gone heavily into the loans because they are tied to the prime interest rate. So right now I’m feeling that pain. Um so after all that um is taken um into account plus taxes and that leaves me with the roughly 3800 take home pay. um and most of that goes to loans. Right now I live on about 1350 a month, that’s what I’m targeting, um and then that difference goes to the the loans.
Mindy: So, flight school is really expensive. she said as though she knows what she’s talking about. I uh, never looked into it because I could not hit the broad side of a barn and my eyesight is terrible and they won’t let me fly planes ever. Um, which is fine. I just sit in the back, but how did you pay for flight school because I understand it to be a lot more expensive than the loans that you took out.
Guest: It can be. uh, it’s a big range depending on how you want to do it. Um, there are, you can go to a university, a four- year university and get all of the required flight hours to then become a flight instructor um and start making some money and those degrees typically run 120 to $150,000 all in. that’s very rough. There are what are called part 61 schools, which are kind of mom and pop schools that you can go to that you just pay a flat fee for the for the plane plus the instructor plus maybe fuel potentially. And that’s more or less what I did. I I did a very um as cheap as possible uh, route to this. Um, the way I got the money though was I was a stay at home dad for part of it, but also so I got a personal loan um from my dad and he gave me about 25,000 to get started and that got me a pretty good chunk of the way. that then we had to take out an additional 50,000 and unfortunately, flight loans do not qualify for student loans unless they are tied to a higher education um degree. So the only option that we had outside of paying cash for it was a home home equity line of credit. We had to prove that we were able to pay the full $50,000 up front. So a a an immense amount of privilege. um for sure, but my parents said, you know what, we’re totally okay with this. We know you’re going to work hard and you’ll be good for it. You’ll pay us back. So that’s what they did and so I’m in the midst of paying paying that back right now, but you’re right if school is incredibly expensive and unfortunately, I think it’s unfair because it’s like you have to be in this really good financial spot as a family to even be able to afford it in the first place. Um I wish there were other ways to to go about doing it, but that was where I found myself and so I just did what I had to do.
Mindy: Are there any opportunities for pay increases as your experience level grows or uh, picking up extra shifts or I mean there has to be a some downtime. You have to be able to sleep and like walk us through that.
Guest: Yeah, it’s, um, so there I I’ve flown in two different arenas and I I’ll use some jargon and I hate doing that on an interview because it doesn’t mean anything to you guys probably and it’s not going to mean anybody anything to anybody who’s not a pilot. But when I first started out flying those small planes that I talked about, I flew in a in a realm called part 135 and that’s the regulation that the FAA ties the company and the pilots to and they have a certain set of rules. part 121 is the big jets and that’s what I’m in now. When I was a part 135 pilot, they have certain rules as far as how often you can work and it’s the same with 121. The numbers are just slightly different. Um but you’re right, you have to have a certain amount of rest and you have to have a certain amount of days off in a certain window of days, like you have to have 24 hours of rest every seven consecutive days and lots of rules like that. Um typical pilot schedules for the 135 at least for where I flew was I worked three to four days a week typically and I had the rest of the days off. So it’s a pretty good schedule. So what I would do was fly on my days off as much as possible. Uh I tried to anytime our company had like an incentive program or some sort of bonus for flying so many shifts in a in a certain time period, maybe over the summer when demand was going to be high, we would get paid a certain bonus and I just always tried to make sure that I hit that bonus but then tried to fly no more than that. So I kind of maximized my time versus money. Um so I did that as a first officer. It was during Covid that I was flying um as a first officer that really small company. So there was really not a lot of demand to sit in a tiny little plane together jammed with eight other people. Um but as a captain um and the covid restrictions were starting to become a little bit less stringent. Um I made a lot of money um that second year for that small company as a captain. uh and I worked, gosh, it had to have been 70 hours a week, 75 hours a week or so. Um and I made more on the days off. like I would work typically two days extra for the week and I would make more in those two days than I did the four days flying uh regular. So that helped tremendously in the 121 world. there’s maybe a little less opportunity to make extra money because you’re divided based on your seniority in the airline. I’m a very junior pilot at my current airline. and so I’m on what’s called reserve. so the way that works and if I’m getting too long-winded, let me know. but the way that works is I take call and I sit at home and I just wait for the company to say, hey, we need you to come fly. And if so, then I go fly if they don’t, then I’m free to sit in my pajamas all day and do whatever it is that I would like to do as long as I can get to the airport within a certain amount of time. So I may go a month without flying much, but there’s not a lot of opportunity to fly extra. Once you have the seniority, you can hold a line, which is a very set amount of flying that you do on a schedule that you know a month in advance and if you want to pick up on your days off, that pays extra. So there will be times where I will be able to make extra money just maybe when I get that seniority and then of course the biggest difference in pay and the way you increase your pay is through longevity at your company because every single year there is a jump up in pay and then what seat you fly. So if you upgrade to captain, you get paid quite a bit more on anywhere between 30 to 70% more per each flight hour.
Mindy: How do you upgrade to captain?
Guest: Uh the FAA has a set amount of time. You have to have at least 1000 hours of what’s called fixed wing turbin time. So fixed wing is in airplane and not helicopter and turbin meaning that you’re flying a turbin engine aircraft. Um once you hit those, the only other small and I say that sarcastically factor is you have to have the seniority to hold that seat. So you have to if say if you work for a large airline that has 14,000 pilots and you may need to to be there seven years before you can hold that seat. So when you bid for it, you bid against all the other people who want that seat. and if you don’t make the cut, the number of captains that the company says then they say, sorry, you’ll have to, you know, try again next month or try again next year. So, um it could be anywhere between I could maybe upgrade next year, I could maybe upgrade in five years. It depends on the plane and on the base. Um it’s fairly complicated, unfortunately. um and I don’t know exactly when that might happen, but eventually that will happen um and I look forward to it.
Mindy: Okay. Uh, one of the issues that you have is or one of the issues that you said you have is that you struggle with the difference between being frugal and being cheap. What do you think the difference is between being frugal and being cheap? Have you defined that for yourself?
Guest: I think part of it is when you make decisions that do not align with what your stated values might be or and even even easier way might to might be to say that if you think you would enjoy doing something but don’t do it because you’re afraid of the $18 that it costs plus tip or whatever it is, then I think you’re probably um, you’ve have your toes across that line in the sand between frugal and cheap.
Scott: So where are you right now?
Guest: I I think I’m I’m jumping back and forth um depending on kind of where I’m at in my in my own head. Um, because I feel and this is probably not accurate and there’s probably a 45 year old out there thinking this guy’s 33, he’s young, shut up. Um but it if feels like I’m getting a late start in life. Um and being a part of the financial independence community is just as far as reading blogs and watching videos and being kind of immersed in the in the culture. It’s very difficult to not compare yourself um against others. And so it feels like because I had to go through a divorce and kind of had everything reset on me that I have to really push myself to make as much as I can, reasonably, but also save as much as I can so that I can still sort of in my mind, I guess I equate retiring early with winning. Um and that I feel like if I don’t do that, then I might risk losing, IE not being able to to retire early or at least not having the option if it ever comes a point which time where I think I don’t really want to fly anymore or I don’t want to do work for pay anymore.
Scott: So walk me through you you your salary is 110 pretax?
Guest: Yeah, roughly.
Scott: Okay. and and you’re you’re putting 25,000 into your 401k and you’re getting, 25%, is that what you said? Yeah, yeah, 25% about it out. You’re getting a 16% non elective match, we’ll call it a match for folks listening but non elective contributions is 16 grand. that’s 41,000 that’s hitting your 401k on an annualized basis. Is that correct?
Guest: Uh, yeah, that sounds that sounds about right. Yep.
Scott: Okay. and how much of your loan are you going to pay off on an annual like in a year? Ho how how much money is going towards the the debt repayments that you have?
Guest: Right now, I think I’m averaging about between 2500, between two and 3,000 a month probably right now and I’m planning on continuing that until the loan is completely paid off.
Scott: Great. So so you you are generating $75,000, give or take in wealth on $110,000 annual salary right now in your current situation. That that is the best I’ve ever heard on the money Money Show podcast. I don’t have have you heard, have you heard of a better a better savings rate than that Mindy in terms of wealth accumulation, which I would consider debt repayment part of wealth accumulation?
Mindy: I don’t think so. Maybe somebody making like 400,000, but that’s not the same.
Scott: So, so yeah, I I think, I think what you’re, your question is, yeah, you can, you can definitely say, you know what, like there’s a pace to go at, but you know, maybe making $110,000 and spending $1500 a month is not the, not a good interim lifestyle. I think, I think yes, in your case, I would ease up a little bit and I’d allocate another $500 or $1,000 to fun and and those those types of things. So I I I also think it’s a question of of allocation of resources, right? You’re gonna you’re going to pile up an enormous amount in your for if if you keep up this pace, you’re going to be debt-free and you’re going to have hundreds of thousands of dollars in your 401K in a year or two. in in two or three years, right? I mean, you’re, you’re already on that trajectory. But what’s that going to get you in in, you know, when you’re going to pop up, you’re going to have a bunch of money in your 401K and a good job, um, and you’re going to be starting from scratch outside of that. I think that’s where we like I would almost say, where do you want to, uh, point the direction of your finances and what portfolio do you want to have in three, five, seven years because the trajectory you’re on is going to get you a middle class output, which is fine, um, but you you definitely one can ease up and two might want to think about where you’re directing those cash flows.
Mindy: I don’t know, is that helpful? It’s it’s helpful. It’s it’s like I it’s like I intellectually know that and emotionally is a is a different story? Have you written down your values? I thought you had a really great definition of the difference between frugal and cheap. You said it’s not your it’s it’s when you make choices that are go that go against your values based on it’s going to cost $18 plus tip. So, have you written these down? We did an episode, episode 362 called Scott Trench’s step- by- step guide to building your perfect one page investment plan. You know approximately how much money you want to have as your FI number, but I also listen to somebody who was so excited about being a pilot. I listened to you describe the piloting stuff and you you seem to really love it and I think a lot of people focus on the RE part of fire, they don’t focus so much on the F I part. You’re doing great financially. you don’t need to quit your job unless you wake up in the morning, ugh, I gotta go pilot a plane. I don’t know anybody who pilots a plane who’s like, ugh, I got to go pilot a plane. They’re all like, I get to go fly today. hooray because it’s an exciting thing. Who doesn’t love to fly? I mean, okay, there’s people who don’t like to fly. Um, email Scott at biggerpockets.com to tell him all about how much you don’t like to fly.
Guest: I think my fear or my, the the, the excuse or reason for my behavior comes in from two areas. I think one is the divorce as far as the mind set shift that happened during that process where just my like my total world was just completely turned upside down and I thought everything was kind of going well and was on a good track and then, you know, you get hit by a bus on Tuesday kind of thing. Um, and the fear of that happening again is tremendous. Uh, the second part comes from the fact that my daughter is only going to be in her formative years for so long and the I would like to be able to spend as much time as possible essentially with her while, you know, I still am her dad and she wants to hang out with me kind of thing. Um, so it’s like I’m trying to push myself to get to where I have as many options as possible as soon as possible so that if, if I want to, you know, move to Baltimore and not fly at all, uh, that’s a possibility if the commuting and and the work just becomes too much and I can’t make her recitals or her games or what have you. So I think those those are my two areas why intellectually, like Scott says, makes perfect sense and I think, yeah, of course, there’s I need to to loosen a little bit and not be so uptight, man, versus what I’m actually doing.
Scott: Now, now, now, another, another component here as I going back to back is is you have no runway and I use the concept of financial runway a lot, so that that’s that’s that’s, but but, but but like you’re you what you’re doing with your money is you’re putting all of your cash into paying off this debt. what by the way, what’s the debt? What is the what is the interest rate and terms of this debt? I know it’s with your parents.
Guest: Uh well, it’s it’s part of it is personal loan. At this point, the largest part is personal loan which has he’s not charging me any interest. Um the home equity line of credit portion is about $21,000 left at this point and it’s at a roughly eight and a quarter ish percent interest rate.
Scott: What what do you invest in in the stock market? What what is the what is the equity portion of your portfolio?
Guest: It is 100% US stocks. a mix of um depending on the broker that I’m with. um total stock market and S&P 500 because I’ve done some tax loss harvesting they’re kind of split depending on
Scott: Okay before before taxes, what do you expect that portfolio to return over a long period of time?
Guest: I would say if we’re talking um inflation adjusted, um probably I would say I I like to use 7% um occasionally I use 6%. So either six or seven.
Scott: Perfect. Okay. So you got an 8% loan and you’ve got an expectation of a 7% highly volatile return in the other hand. So my thoughts are, why why don’t we have a reallocation event here, liquidate part of that stock portfolio, clean up this debt and then I would encourage you to consider building out a runway um of of personal finance and and building up a little bit more of an emergency reserve. From there, if you’re sitting on $25,000 for example, which for you is uh five years of spending, down two years of spending in in this case because your, your your your your expenses are so low, think about like that that like freedom is a continuum here, right? And that’s a much, you’re, I think you’re much more free with that portfolio of being um, uh, debt free, you you you’d literally be debt-free, right, within a week and beginning to build out an a, a, uh, a financial runway. Yes, it would be involve liquidating some investments, but if that’s what you believe, that’s what that’s your philosophy at 67%, and that’s the there’s an 8% guaranteed return over here. Why not, why not just consider doing that from a resource a location perspective and in six months you’ve got 25, 30, $35,000 in your emergency reserve, you’re, you’ve also accumulated 41,000 your 401K. That’s a pretty good spot to look up from and have way more options than you have right now.
Guest: It was a it that was an option that was brought to my attention and I almost pulled the trigger on it and I can’t exactly say why I didn’t. It was just some dumb fear or fallacy of logic that said, oh, I bought these shares in an after tax brokerage account for a longer term goal such as a a down payment for a house or any other number of things. And so I shouldn’t sell them because that’s what it wasn’t for. and I don’t know and I just and then I just dismissed it and thought I’ll just take cash flow instead and shove all of it, uh, to the loans.
Mindy: Yeah, and you don’t have to sell it all. Right, yeah. You could sell 10,000 and pay down 10,000 and see how does this feel? sit with this for a month. Oh, I like not having that extra 10,000 in debt. I’m going to sell 10,000 more or I’m gonna sell 5,000 more and slam this money as much as I can. Let’s talk about your move to Boston. When does your lease come up where you’re at currently?
Guest: So I currently do not have a lease. Um, I lucked out in the apartment that I found and for whatever reason and I’m not sure the landlady did not pursue having any of the tenants sign a lease of any description. It was just a hey, can you Venmo me the money? Um, and you’re good to go. I’ve never even met her. I mean I talked to her on the phone and that was about it. Um so I just rent this little room from her um, for very little money relatively speaking in the Boston area. So I can leave at any time. Um so I’m very flexible when that when it comes to that. The only thing that would hold me back from moving is my schedule. So I have to be able to have to be able to be at the airport within two and a half hours and so if I move to Baltimore, I cannot physically get there in two and a half hours from the time they call me because I gotta you know, schedule a flight. Um, so I have to wait until I have the seniority to be able to either do long call reserve which gives me 14 hours to get to the airport or actually hold the line where I said that they have give you an actual schedule for the month so that I can plan on when on when you know I need to be at the airport. So I do have to wait until I can get a little bit a little bit more seniority until the move happens. I’m guestimating maybe six months to a year hopefully.
Mindy: Do they not have a base that you can transfer to? I’m asking these questions like I uh I have, I have very little bits of information cobbled together from multiple airlines. So I don’t know how yours specifically works. Can you transfer your base?
Guest: You can transfer the base, but they don’t have a base where I would be moving to. So either way you look at it. If I move to Baltimore, I have to commute um to whichever base I decide to to transfer to.
Scott: Can you switch airlines?
Guest: Not very easily and that that comes with a whole host of uh, issues not the least of which is that it resets your seniority so you go back to year zero pay and you also almost always go back to the left seat. Almost always, I shouldn’t use always but as far as I know that’s how it works. So it wouldn’t be as bad for me now because I’m still relatively junior but I would take a pretty, I mean I would take like a 60% pay cut which is, you know, that that might be worth it. Um, but it’s it’s pretty difficult. It’s also a long process.
Scott: For how long do you take that 60% pay cut?
Guest: For the first year, generally, it’s like a probation year and then after the first year your pay increases roughly 60%.
Scott: And how long do you expect your your daughter to live in Baltimore?
Guest: Um, I am only assured for about two years because they are uh, she was uh, in the Air Force and her um, my daughter’s step father is also in the military and so they’re going to be moving around. So only two years. Um, I’ve considered potentially changing airlines but because of the unknown nature of what their future is going to look like. I also feel like I need to retain my flexibility as well, just in case they move and then I want to move again.
Scott: Well, then I I completely I completely agree with what your instinct is is you move to Baltimore. Um, if you want to be near your your daughter, you have no no choice, um, really and or and you commute to where you need to fly out of and you eat that expense or you commute to Baltimore um, on a regular basis to visit your daughter. Uh, and it’s one, it’s kind of six of one and half does the other. It’s whatever you think is going to be, that’s what you value, right? So invest in that, spend spend your money on, on, on, on making that happen. I think that that yeah, there’s not like a good answer to that question. now that we’ve gone through that and I think those are yeah, those are your choices. So how how long would the commute be from from Baltimore to where you’d be working?
Guest: Uh, it’s it’s however long the flight is. I think it’s roughly two hours. So thankfully pilots have the ability to fly, you know, fair free, um, whether it’s for business or for or for pleasure. So it’s just a sense or a matter of figuring out what airline flies from Baltimore to Boston and then just listing myself for the flight. Um, so, yeah, you would I would look at roughly probably a two hour flight um to get to work and then two hours back at the end of whatever work I was doing in Boston.
Scott: And how frequently?
Guest: Uh as frequently as as the as the number of trips that I have in a month, um trips last anywhere between a day or five days, they typically last no longer than that and then you you are, have to get at least two or three days off between between the trips. So you you would, I would imagine a uh, a average pilot who commutes probably does three to four commutes back and forth each month.
Scott: Okay. So this is not, that’s a lot, but this is not, hey, you’re getting in a plane three times a week um, to commute to work. It’s it’s three times a month to commute to work, three or four times a month, right? So, yeah, it is a lot, um and it’s unfortunate, but I I I think that that that choice would be totally reasonable and and probably frankly what I would be doing in your shoes is moving, moving nearby to spend time with my daughter and and commuting there. I’d either do that or I it if if you thought she was gonna be there for longer than that, I’d switch airlines and reset because you you can do that, but I don’t think given the fact that there’s no guarantee that would be a really hard pill to swallow. So what what do you think? What what what what have your what has your conclusion been?
Guest: Yeah, exactly what you just said. Um I definitely want to have to just have the freedom to say, hey, I’m not working. Why don’t you come over to my house today and when go play or I want to pick you up and or I’ll pick you up from school and we’ll go eat dinner or whatever. Um and create memories with her that are, you know, going to last forever.
Scott: And so it kind of leads us into the other question that I wanted to ask of you guys, especially since you kind of know the constraints now, the decision between just renting and house hacking and I think my mind says renting offers me the flexibility that I need to. Um, because I don’t know if two years is really long enough to do an effective house hack where it makes it worth it, knowing that I’m probably going to be moving away from Baltimore after those two years. Well, my my my instantaneous reaction there is to zoom back out and say, okay, what’s the portfolio? what what what is a realistic position you’re going to back into three to five years from now? right? And I use this all the time. This is how I reset almost every everything in my life when I’m thinking about uh things in business or personal life. And so I I can zoom out and I can say, right now, you are on track to accumulate $75,000 a year of wealth, right? That may change slightly if we uh um spend a little bit more and really ease off the throttle. I can a little bit a little bit more. Um but I think that uh, that that puts you at what, 75, 150, 300, $450,000, uh, in wealth accumulation and you can invest that in a variety of ways. Right now you’re choosing to invest most of that in your 401k. If you said, hey, I want a really flexible financial position. I want the maximum flexibility. uh I want uh, I’m gonna accumulate that. I want uh uh 350,000 of that to be in real estate and I want it to be producing $2500 to $3,000 a month in cash flow as close as I can get to those numbers if I if I can possibly get there. I would say, okay, then we need a house hack, right? And that’s where we would go in and we say, no, the house hacking is going to be part of an intentional portfolio building strategy. You’ve got the income, you’ve got the inclination, um Maryland’s a great real estate market or parts of it are and there’s many opportunities. So that would be where you would use your uh you you you’d use the house hacking as a tool in order to move that portfolio. And I think it has less to do with the flexibility piece because house hacking is the most flexible option, right? You buy the house hack and and and you live in it. And in your case, you could you could conceivably move in, you’d be fulfilling the requirements of your loan and if your daughter happened to move away in two months from then, I think that would meet the with this is where we have to check with a lender and maybe we can discuss this in the Facebook group. But I have to imagine that that would be an event that would qualify you for an exemption to be able to move out and uh in that from the one- year requirement that comes with a lot of owner occupied loans.
Mindy: Was that too overwhelming or that’s that is that help frame the decision between house hacking or renting?
Guest: I would say slightly overwhelming just because I’m so unfamiliar with real estate as a subject and um all of the nuance that goes into that particular decision, um and all the things that have to be considered and all the ways in which things can happen. Um, so, yes, I think a little a little overwhelming.
Scott: Okay. Well, fair enough, if you if you move next month, maybe it’s too soon for a house hack. Uh but if you if you decide to get into real estate and you said, hey, that’s the portfolio I want in three to five years, then I think it would be worthwhile to consider it at some point. Um what do you believe you get a rent for in Maryland? What kind of place would you rent and what what it what it would have cost?
Guest: I did a little looking on on Zillow, um and and I think Redfin and the it seemed to be to kind of I mean of course location dependent but anywhere between like 750 per bedroom all the way up to like 1250 depending on the area. so I don’t know if that’s a large range but that’s the range that I found.
Mindy: Okay. I think you are uniquely positioned to have a house hack where you live near the airport and you have a slightly bigger house and you have a crash pad and you advertise this to everybody on every airline that you can possibly think of, anywhere near BWI. you just say, hey, if you want to rent a space here, it is, I don’t know how much crash pets go for, $100 a month or $300 a month or whatever. And you’ve got 500 roommates. Don’t buy an HOA because they are not going to let you do this. So, don’t buy an HOA, but buy some place that’s super close where people can uh get there easily from the airport. There’s one right by the parking lot by I I’m in Denver. so there’s a parking lot where the the the buses drive you to the offsite parking and then there’s a condo complex right there where people get out, they take the bus over there, they get out and they that’s their crash pad. There’s a a bunch of apartments there for probably all the airline workers. and they come in and they like I’m assuming that the way it works is you come in and you sleep and then you take the sheets off the bed and you wash them and then you leave and like you remake the bed with new sheets or you put them in the dirty pile or whatever. like you could have this system in place where people that makes it really easy for people to want to live in your house with you, you know, constantly coming and going, but it’s it’s making a lot of money for you because you have, you know, 500 roommates but they’re never there. You know what I mean?
Guest: Do you have any experience with crash pads?
Guest: I I don’t. Um I’ve always lived in the city in which I was based. Um but for whatever reason, I don’t think I’ve ever considered that particular option, but that does seem, that just sounds exciting, um but
Mindy: Well, I don’t know if you know this, but sometimes there’s some downtime in the cockpit. You could talk to your fellow pilot, your fellow flight attendants. Just ask them um because you’ve got a lot of time to do nothing.
Scott: Yeah, I I think, I think that there, there’s a look, I think that’s the, that’s the opportunity that you have is you’re going to be away from your property for a good bit of time. So I look, it it in your situation because you’re planning on renting a room and it’s so inexpensive relative to your overall take home pay, like literally you’re going to spend less than 10, 15% of your total pretax income on housing, um which is outstanding because because that um and I I think I think that if you if you were to make a big investment outside of traditional asset classes, something like what Mindy said sounds perfect, right? Because you can just turn this this asset that you’re not going to be using at least 20 30% of the time, most likely into something that produces income for you but potentially.
Mindy: And you’re already connected to all these people who need this opportunity. I mean I you definitely need to talk to somebody who knows more about it than me, but that’s a great opportunity if you already need a place to live and you’re going to buy a house, buy it close to the airport. I mean, who wants to drive two hours to the airport when they could drive two minutes?
Scott: And look, again, zooming zooming back out here, what’s what’s happened here is you had a a, a devastating life impact, right? And it’s kind of completely up-ended where everything you’re doing. You you have, and and I think that produced fear for, for, for, and uncertainty about the future. But now you’re a pilot. You make over six figures. You’ve got a really stable profession here with with this. You’re you’re you’re, you have great benefits. You’re stocking away tens of thousands of dollars per year, almost, you know, you know, in wealth. You’ve got an investment plan, you’re going to be debt-free very shortly. You’re less than six months away from being debt-free. Um, uh in the current phase and you you’re in control, right? This is, this just hasn’t, you haven’t had enough time to like take off yet in your financial position. So, I think it’s, I think it’s just a matter of letting more time elapse here and you’re going to get very, very comfortable with your financial position within a year. You’re’ be like, wow, I’m I’m actually, I’m kind of rich uh is what as I think where you’re gonna end up pretty, pretty shortly here. And you just haven’t had, enough time hasn’t elapsed yet for you to kind of feel that confidence, but you’re there. So I think it’s about putting together a strategy. Like you it it’s hard to internalize after all that you’ve been through. Oh, I’m gonna accumulate 450 grand if I keep this up over the next uh uh what is that? 425 grand over no, 375 grand is 75 times five over the next five years. That’s a large amount of money. That’s probably more than you were conceiving was was reasonable two or three or four years ago when you’re making or how however much you were you’re making $28,000 a year. But you still have a very real problem of you have to make an intentional decision about where you’re going to allocate that and how you and and when you’re going to ease off here and allow yourself to enjoy uh life a little bit from a spending perspective because you’re there. You’ve got a very strong financial foundation um that you’re about to pour, keep grinding until you’ve paid off the debt and then pop up and say, what do I want the next five year of my life to look like and what do I want the financial position to be after that. um make those intentional choices. I I completely agree with the decision uh to move to Baltimore and commute if that’s the best way to see your daughter in your circumstance. It’s sad that it’s that’s the reality, but I think that that’s the I I don’t think it’s I think it’s hard to argue with.
Mindy: Yeah, it is hard to argue with. I can’t argue with any of that. All right, well, should we land this episode?
Scott: Let’s do it.
Mindy: That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench and I am Mindy Jensen hoping that these finance Friday episodes help you stay out of the danger zone.
Mindy: Bigger Pockets Money was created by Mindy Jensen and Scott Trench, produced by Kalyn Bennett, editing by Exodus Media, copywriting by Nate Wine Troub. Lastly, a big thank you to the Bigger Pockets team for making this show possible.
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