The All Out Approach to Achieve FIRE in Your 30s (Median Income Earner)

Think you need a six-figure salary to retire early? Think again. Today, Scott breaks down how a median income earner in their early 20s can achieve financial independence in their 30s with the right all-out approach. And as a quick note, if you have a newly graduated person in your life, this episode is for them. Please share this episode with a young person in your life.

Hello, hello, hello and welcome to the Bigger Pockets Money Podcast. My name is Mindy Jensen and with me, as always, is my set for life co-host, Scott Trench.

Scott: Hey Mindy, great to be here. Living the dream, right? Dominate life, money, and the American dream. I’m super excited for today’s episode. This is going to be a presentation. This is uh a lot of the lessons from Set for Life packaged here for 2026. And it’s, hey, how does a median income earner, let’s create a persona, this person who’s 22 years old, just getting started in life, no assets, no debt, has the privileged position starting with a blank slate, and uh that median income. How do we help them have a realistic shot to get set for life, uh financially free by age 30? I think it’s a fun challenge and we’re going to be going through a detailed financial plan for that person today.

Mindy: Okay, Scott, we are going to call this particular person Joe.

Scott: Yep. Uh Joe is my as my persona, he’s the average Joe. How do we help average Joe who’s not starting from this particularly special position? Yes, it’s more advantaged than some, it’s less advantaged than others. Um how do we help him really uh crush it?

Mindy: Okay, Scott, before we jump into that, let’s clarify the position that Joe is starting from.

Scott: Yep. So Joe is 22 years old. He’s a recent college graduate. He’s fairly buff, as you can see here. And he makes about $62,000 in his first job out of college. His net worth is zero. He’s got no debt, which is great, but he’s also got no assets. And uh he’s very ambitious. But I think even more than his ambition, he has this fear in the pit of his stomach, the fear of the the cage of corporate life, of of being in a cubicle or working a corporate job, uh building somebody else’s business for the next 30, 40 years. And so because of that, he wants to achieve financial independence as early as he possibly can so that he has options like early retirement, world travel, starting a family from a position of financial strength, or maybe even going into business for himself at a fairly young age. So that’s the the motivation and starting position of Joe here. Um we will also in the future do versions of this for folks who do have a lot of debt or are starting in a tougher financial position maybe making less. But this is the person we’re starting with today. Hopefully you can get lessons from it and find it valuable حتى if you’re not exactly in Joe’s position or quite as buff as him.

Mindy: You know, Joe sounds a little bit like somebody else I know.

Scott: I wasn’t this buff if that’s what you’re referring to.

Mindy: Scott, I’ve known you for 10 years. You have always been uh very buff.

Scott: Well, thank you, Mindy. Uh Sweat for Life is going to be the next book that’ll be comes out with, right? So this journey, by the way, to financial independence is going to be grounded in this concept of of the the shockingly simple math behind early retirement, right? This is a a famous blog post by Mr. Money Mustache. Um you should go read it, it’s by the same title. And he’s produced this chart where it says your your savings rate as a percentage of your take-home pay is going to be the single most variable on the path to early retirement. If you have reasonable assumptions like 7% after inflation returns in a portfolio, for example, you can retire fairly quickly if you can bump your savings rate up. Many people save less than 5 or 10% of their income towards retirement and they will be working for 50 or 65 years, you know, almost an entire lifetime. But if you can bump that up to 30, you shave, you know, almost 30 years off of the the retirement the time to retirement for someone who’s saving 5%. And if you can bump it up to 50%, you can retire in 17 years. And if you can get to even higher numbers, you can really knock that number down to less than 10 years, which is where we’re going to ultimately shoot for to help Joe uh retire early. Now, the obvious problem here is there’s a floor to how much you can spend and and really enjoy life reasonably in America today. So his income, Joe’s income will be the primary limiting factor in achieving early financial independence, but if we can keep our spending low and ramp that income, which we’re going to talk about today, uh we can get there fairly quickly here. So the plan is going to optimize for spending as little as possible, increasing income as much as possible, and assuming average investment returns on accumulated savings. So that’s going to be the the groundings of this plan.

Mindy: So Scott, this shockingly simple math behind retirement is like straightforward. Math doesn’t lie, math maths out, you know, etcetera. But you gave a similar presentation to our co-workers at Bigger Pockets multiple years ago and there was a comment from one of them that really stuck in my mind. And this person said, but I’m young now. I want to live it up. I want to, you know, enjoy my time. I’ll think about retirement later. How can we help Joe reframe that thinking so that he is setting himself up for life without really hurting his current lifestyle?

Scott: One of the the core challenges with American household spending is that housing, transportation, and food eat up um essentially two-thirds of the the average American household budget. And this is not the fun stuff, right? This is not actually having fun for a someone in their early 20s in my opinion. I think that the the more fun stuff is going to be the entertainment sector, uh maybe maybe an a portion of this transportation um sector where you’re having fun, um some going out, um and eating, you know, but but the these areas, these smaller slices of the spending pie are really where a lot of life is lived. And if you can just control the costs for where you put your head at night, what you drive or how you get around on a day-to-day basis and make most of your food most of the time when it doesn’t matter, like packing a lunch to work, making your own breakfast, making your own dinner when you’re not going out with friends, for example, you can really get ahead. You can you can make major progress over the average American. And when I was, you know, in my early 20s, that’s what I did. I lived with roommates the entire time. Um I I drove a Corolla, um paid off Toyota Corolla, and I made most of my food most of the time. And that allowed me to spend more than the average household on entertainment, fun, alcohol, carrying on downtown and frolicking around Denver. And and so I I think that that’s what has where life is actually lived for a lot of people is in those discretionary um spending categories. And I’d actually encourage you to spend a little more in those categories than the average, just control the big three. So that’s going to be the the the big one there and I and I don’t think I missed out on much of life at all. I think I I had just as much fun as friends who spent twice or even more than what I was spending at that point in time.

Mindy: Scott, I want to call attention to our past episode number six, going in the wayback machine where Sarah Wilson paid off $30,000 in debt in three years. And the way she did it was by not going out and spending money. She was really hyper focused on paying off this debt because she was also only making $30,000 a year at that time. And one of the things she did was have friends over, have uh like potlucks at her house. So she’s still getting the social aspect while not spending the money. So, um I I thought that was a really interesting way for a younger person to be thinking about her debt and thinking about her debt payoff. And I just want to encourage people, yes, go out and have fun, but also not everything has to be a spend money on it endeavor.

Scott: Like another another thing. I like to ski, right? Well, in in Colorado, an epic pass is like was like 600 bucks at the time, right? And I got some I got some used skis, some boots, and I went all the time to go skiing. And it was just not it was not an an issue to not have fun during this period. Again, the cost centers are your housing, your transportation, and your food. And once we’re going to talk about today, if you can control those big three and some other things, you can ramp your savings rate dramatically, especially if you make a median income, um and begin really making compounding progress towards this goal of early financial freedom.

Mindy: Well, let’s talk about this goal, Scott.

Scott: All right, so the goal is to satisfy a mathematical equation, right? The equation is going to be your assets, your asset base times the return it generates must be greater than or equal to the cost of your lifestyle, and you should be able to sustain this for the duration of your life. Right? A good answer to this question for a well-diversified portfolio is to accumulate 25 times your lifestyle expenses and you’re financially free. So if you want to spend, you know, $40,000 a year, you need a million bucks. So what I think is really important about observing this equation is that the lifestyle expenses is the key variable for most people who want to become financially free. The lower your fixed costs for living are, the more wealth you accumulate, the faster you accumulate assets, and the less total assets you need to retire early. I also want to call out that the game does not have to end when you hit a financial freedom number. Let’s say that you accumulate a million bucks by 30. It’s highly likely that you may continue to earn some kind of money on top of that and see that asset base grow. So once you satisfy this equation, you can often most many people will find that their lifestyle actually begins to swell. They’re able to spend 40, then 50, then 60, then 80, then $120,000 just off of their asset base as the years and decades go on. And you can really live a middle, upper middle class or even fat fire lifestyle eventually at some point in your life if you achieve fire early in life. It’s not a you’re not bound to frugality forever. It is just the most important thing to get started on the journey in terms of the mathematics. So that’s the goal. Um the core principles to achieve this goal that we’re going to focus on are going to be five areas. There’s going to be frugality, the wealth creation journey begins with controlling expenses. Then we’re going to talk about scaling income. There are two kind of core maneuvers we’re going to do to to scale income and and and really ramp that savings rate after we control our base level expenses. Those are your career, and then a special type of housing decision called a house hack or a livin flip. We’re going to talk about a aggressive growth style investment portfolio. We’re going to talk about the process, the financial model that guarantees or comes as close as to a guarantee as you’re going to get in the world of finance to helping you get rich. But we’re also going to layer on events, the side bets, the side hustles, the real estate investments, the business opportunities, the career opportunities that you pursue that have a chance to propel your journey forward much faster than the base case financial plan. So those are the five principles that I think are most important for someone in this position if they want to get ahead quickly. All right, want to cut your expenses in half, your biggest ones? Stay tuned. We’re going to be breaking down house hacking strategies right after this.

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Mindy: Let’s jump back in. I think that it’s important to remember, this is for Joe. Joe’s in his early 20s. Joe’s superpower is his timeline. He has so much time for his wealth to be growing and his like sub-superpower is the fact that he is most likely not married, he is most likely does does not have kids. So he’s got the freedom to work a little extra, do some side hustles, do this house hack because he doesn’t have to worry about like who he’s living with. He’s, you know, just some guy living with some other people. And having this ability to be so flexible is, I mean, maybe that’s like a co-superpower. I’m not going to say sub-superpower, I’m going to say co-superpower.

Scott: Absolutely. The those advantages are remarkable, right? Because Joe, we want to optimize for getting to this position as early as possible so he can take risks that are very lopsided um that have low low downside, just a a dilution of time, but have the potential to really ramp things forward. We can be very aggressive because if things don’t work out and things go a little slower, Joe will might retire at 35 instead of 30. And that’s that’s much lower stakes than for example, we did another one of these for a woman named Barb who was 50 and divorced and lacking a skill set. Now there’s really big time pressure because the peak earning years are surely um in the next 10, you know, 10 or 15 years and there’s not a 30 or 40-year horizon. Joe can fail many, many times on this journey and succeed one time and and win. And these are huge advantages and we’re going to we’re going to uh maximize those with this particular plan.

Scott: Here is the simplified plan. We’re going to go into detail on each section of this though. Um we’re going to lump this journey into three phases, the accumulation of the first $25,000, which is the hardest part of the journey. Then we’re going to get to talk about going from $25,000 to $100,000. Then we’re going to talk about building a million bucks uh in net worth. Um and from there, um the opportunities will will magnify and compound geometrically and Joe can really will be able to chart his own course surely by the time he reaches a million dollars a net worth. The first $25,000, I don’t have a lot of great answers or cheat codes or shortcuts here. We’re going to cost cut our way to that first $25,000 and we’re going to do it in a year. And I’m going to talk about the aggressive way to do that. As we start accumulating that wealth, we can begin deploying that first $25,000 into a couple of really meaningful lifestyle investments. One is going to be a house hack and the other is going to be into a career pivot that allows us for upside. One of the fundamental problems Joe will run into is that in much of corporate America, a career progression is you start at $62,000 and then you get a raise two years later to $70,000. Then you get, you know, a 3% inflation adjustment, uh cost of living adjustment if you’re lucky, and then you get another 7 to 10% raise after two years if you get promoted. And that’s just too slow. It’s just way too slow for our purposes here. Joe needs to have a plan that could work, that could propel his income further much faster. And that generally means a career pivot to something that is uh going to pay very well for an in-demand skill, to something that pays commissions, like a sales type of career, to joining a small business or startup that has the equity potential to grow at some point. We’re going to have to use that base, that that that base of cash to take those opportunities. And those opportunities often come um at the cost of the highest possible base salary in the marketplace. And then the last part of this, to go from 100,000 to a million, we’re going to layer in two parts of our plan. We’re going to have a crystal clear financial model that maps out the likely income and expenses over the next couple of years, assumes a conservative rate of return for our expenses and guarantees us that we will build wealth if we are consistent and in applying it. And we’re also going to layer in a bunch of side bets um that have the potential to drastically accelerate that plan. I have some favorites in there, but those are just thought starters. Joe will self-educate and read a bijillion books. So he’s going to find even better bets over the course of this journey than what we’re going to talk about here.

Mindy: So, Scott, I want to point out that in years two through five, they this Joe will simultaneously house hack, invest, job hop, and look for scalable income. We have two episodes that talk about job hopping and the exponential income growth that can come from job hopping. I’m going to say right now, as we’re recording this on September 30th, 2025, the job market is not as amazing as it used to be. But this is information for the future. The new job budget is always higher than the job retention budget. So job hopping is a really excellent way to dramatically increase your income. Episode 97 where we talked with Financial Mechanic, she detailed exactly how she job hopped her way to, I think two or two and a half times her original income. And a purple life on episode 110 also talked about how she job hopped her way to significantly increasing her income. Like neither one of them took additional courses or got additional degrees. They just changed jobs. So that, like don’t underestimate the power of job hopping.

Scott: Yeah, and this is not saying job hop for job hopping’s sake. This is understanding that if your goal is to become financially free early in life and you are an entry level marketing professional at, you know, a Fortune 500 company, the game cannot be won. You cannot win on income alone with that career path. And so you must pivot to something that can win. You could win over eventually, but you’re not going to you’re not going to get there by 30 unless something goes unbelievably well with your side business or real estate or whatever it is. But that’s what I’m what I’m saying is that is Joe is going to pivot to a career that could win at some point. And that may take one, it may take three, it may take no job hops from where he’s at currently, but he’s going to be open to it because he’s built that base um of cash. Um so let’s get into the plan, right? Let’s go into detail on this first $25,000, right? Again, this is the this is the hardest, right? Most people never get over this hump and and they never build the liquidity early in life and so they just fall into something and they sit sit there for for decades. And that’s what we’re trying to avoid here for Joe. To do this, like I mentioned earlier, we’re going to control the big three, housing, transportation and food, right? This isn’t a financial analysis, it’s remarkably easy. This is average household spending for one-person households. This is two years uh from two years ago. The new data will be released uh in the end of 2026 um for the survey here. So we’ll have be able to update that. You can adjust this up a little bit, but it’s about $43,000 per year that the average one-person household in America spends per year, um which of course Joe will be in there. Right? And the themes here are housing, Joe just lived like a college student for a few more years. Get a roommate. You can get a room in Denver, Colorado for 700 to 1000 bucks depending on how nice you want it to be in a nice spot, right? No issue there. This is not housing does not have to be the killer um for your financials if you get a roommate. Too many people ignore that. They want to live alone. You want to live alone, you won’t be getting financially free uh early anytime soon. That’s totally fine. Um but if you want to become financially free, get a roommate. Uh at least for that first few years. Your car, purchase something that’s 8 to 12 years old, an economy vehicle or even better, go without a car entirely and bike or walk to work. Many cities around the country are very bikeble. I did this for years uh here in Denver personally. Food, prepare most of your meals most of the time with healthy food purchased from reasonable grocery stores. Right? It’s that simple. Don’t forgo eating out with friends or having, you know, or or spending time and and nurturing relationships, but don’t be ordering takeout on your own and don’t go out to eat alone. Don’t go to the, you know, the breakfast spot in the morning before work. Just make those at home and you’re going to be so far ahead and you’re not going to miss out on life. For insurance, this is a nuance for the 22-year-old. Joe will only be paying for insurance for transportation and health care most likely. We do not need this $4,000 a month expenditure on personal insurance and pensions that the average American household does because Joe has no dependents at 22. So he needs at most a very simple life insurance policy to cover funeral costs if he should pass away in an untimely manner. But even I didn’t even have that when I was 22 through a 20 26, 27 when I when I um, you know, which when I get married in my 30s.

Mindy: With regards to insurance, you are saying here use high deductible plans for insurance policies. I want to give Joe a little bit of a caveat with that. If your high deductible plan on your car is uh $5,000 deductible and you don’t have $5,000, maybe go with the lower deductible while you’re saving that up. That’s the kind of thing that could really derail your finances if all of a sudden, like maybe biking isn’t an option for him. He’s too far away from his job or it’s too cold or whatever and he does need a vehicle. Having a high deductible plan, having an accident and then not being able to replace the car because you don’t have the $5,000 or fix the car if it’s not totaled, could be an issue. So ease yourself into these high deductible plans, but definitely go into these insurance policies with the idea that you are going to raise it to a high deductible plan just because once you have that that deductible, the equivalent of the deductible sitting there in your emergency fund or sitting there in your high deductible fund, that’s going to give you a lot more freedom and your monthly outlay is going to be a lot less.

Scott: I’ll disagree with you very respectfully here, right? So if if this was presentation for Sam who wants to, you know, do all the right things and get set up to fund his retirement accounts by 65, I totally agree with you. But Joe is not messing around. Joe is going to get financially free by 30, come hell or high water, and he’s going to figure it out, and that’s why he’s watching this. And Joe is going to save 30,000, 25, $30,000 in this first year, or $2,500 bucks to $3,000 a month. And so that $5,000 deductible, even if he has to pay it in the first week and get super unlucky, he’s going to pay it back in two months and get right back on the the wagon moving forward. So and these deductibles are not that high for someone who’s saved as much as Joe. So I’d say start out the gate and play the odds on this one. And if you get really unlucky, you get really unlucky. I did this right out the gate and I I think that if you’re serious about getting ahead and you’re not going to just you’re not going to, you know, pretend like you’re going to get get ahead and and you’re going to actually cut your cost and accumulate real cold hard cash, then go with the high deductible plans.

Mindy: Agree to disagree and Joe, now we’ve presented two different sides and Joe can choose which one he wants to do.

Scott: There you go. And then for the fun budget, I’m I’m going to double Joe’s fun budget. I think that he can spend twice as much as the average American on entertainment. Joe is 22. Joe should enjoy life. Make sure he lives somewhere that he’s enjoying where he lives, he’s making friends, he’s going out, he’s enjoying, you know, traveling if it’s to the mountains or to the beach or whatever it is that is local to where he’s doing, that he’s taking full advantage of that because you’re only in your 20s once. And this is really where life is lived. It’s not lived in a one bedroom solo apartment versus a master bedroom shared with two or three roommates for the first year.

Mindy: I will agree with that because exercising your spending muscle, learning to spend is something that has been very difficult for me and I am still learning this because I have had a lifelong relationship with frugality and fairly extreme frugality, like cheapness. And it’s unnecessary.

Scott: Yeah, this is not blow 10 grand a year on, you know, night clubs or whatever. This is have good responsible fun going around and and and do what you need to do here, um, with this. This is this is your your unlimited Natty Light budget, not your Grey Goose, um, budget. Yeah, I consider I don’t even drink anymore, so whatever. So that’s going to look like this, right? The average one person household is going to spend about $46,000 a year. I think Joe can do this on $30,000 a year. I did this on about seven or $8,000 less 10 years ago, but it so this is very similar to what I was doing, adjusted for inflation if you’re in 2025, 2026. So, you know, again, that that that biggest cost difference between him and the average person is going to be housing because he’s going to have roommates, right? A roommate or roommates. The next biggest one is going to be transportation because he’s going to drive a paid off Corolla from 10 years ago or or a very cheap Corolla that has a very small loan for, you know, 7 to $10,000. Then he’s going to get, he’s going to have a very uh cheap food budget because he’s going to be making most of his food most of the time. And he’s actually going to spend more on entertainment than the average American. I have everything else the same except for personal insurance and pensions where I’m going to have go spend very little because he has no dependents here at this point. And all of the the additional savings can go into the bucket.

Mindy: $16,000 is amazing. And I want to like calm down all the people who are like, there’s no way you could do this. Okay, maybe it’s not $16,000 that you’re saving. Maybe it’s only 14. Maybe it’s only 10. Maybe it’s only eight. It’s still less than the average and that money is going somewhere.

Scott: It’s impossible. I did this.

Mindy: Well, and that’s the thing. Live like no one else now so you can live like no one else later, to quote Uncle Dave. Uh but also this isn’t impossible. This is absolutely possible if you do it on purpose. And it’s absolutely possible to spend all $46,603 of the average one-person household and more if you aren’t paying attention to your money. You need to be conscious of where your money’s going. And you don’t have to track every single penny, although it’s a great habit to get into so you know where your money’s going and it’s going there on purpose. But you need to be conscious of where your money’s going. That’s the bottom line here.

Scott: All right. Joe has the option and I encourage him to do this to supplement that frugality with side hustles or investments in his career growth. So there’s kind of two buckets, there’s two themes that he can explore here, right? One is he can just work hourly, right? That’s Uber driving, bartending, freelance work, cleaning or landscaping work, tutoring, working events or seasonal projects or something like that. And this is where you’re trading time for money to more quickly amass that initial, you know, uh fund. That’s great. I encourage Joe to do that if he has a specific use case for cash. This is going to deploy strategically, but it’s not good to spend huge chunks of your life working a job and then working a lower paying side hustle in an indefinite timeline just to get ahead. This is good if you have a specific goal that you want to advance and you need that extra two, three, four, $5,000 bucks. If Joe is very comfortable with his savings rate and wants to get play do some more strategic side work that can actually make bigger lump progress towards his goals, then I’d encourage him to think a bit more broadly about, hey, can I take study for those 100 hours or whatever and get my real estate license? Can I get a insurance or lender or financial planning license while I’m working my job? Can I become a notary? Can I learn to design code or use AI to build websites and get a couple of projects there? Can I begin writing regularly and producing content on some type of topic that I’m an expert in or that I’m willing to become an expert in so that as time progresses, I have the option to do some sort of online creation or freelance work there that could actually pay me like an expert. So I would encourage Joe to lean towards those more upside concepts, but not dismiss the idea of ideas for hourly income, especially if he wants to aggressively build out a buffer or a base of cash.

Mindy: I would encourage him to really consider that real estate license because you need some experience in order to be a real estate agent uh successfully. So he can gain that experience while his friends are figuring out their life and then as they are ready to buy houses, here’s Joe with his real estate license and can start helping them out.

Scott: Okay, and you know, as Joe is accumulating this first 25,000, what I’m going to recommend he do he does is he just sticks that in his savings account. I’m recommending he does not invest that. I’m recommending he does not max out his 401K. I’m recommending he doesn’t put that in retirement accounts. The reason for that, and I know that’s controversial, is I’m again, I’m a fan of these retirement accounts. They’re really powerful ways to build wealth. But again, we’re looking at the specific use case of a 22-year-old who is hellbent on achieving financial independence early in life. And that person when they’re 23 with 20 books on business having, you know, having read 20 books on business and has 25, $30,000 in cold hard cash is going to be much more dangerous. They’re going to be able to have much more opportunity than if that had gone into maxing out their retirement accounts. They have much more optionality at that point in time. In a year or two, I’m going to say max out those retirement accounts and maybe do that for the rest of your life or the rest of your career, right? So I’m not against retirement accounts. It’s just for this first year for this very aggressive individual who wants to get ahead early, the optionality of that cash to buy real estate, house hacks, live in flips, start a business, buy a business, or transition into a sales or commission role that has real, real high upside um from an income perspective. That’s so much more valuable than getting that head start in this scenario for that 401k. If this person was saying, I want to just begin investing now for a long-term time horizon and I want to retire at 65, totally different advice. We’re going to max out those accounts. So that’s my my caveat here. So if you agree with that order of operations in this situation, we’re going to build up that $1,000 buffer. We’re going to pay off any bad debt if we’ve got that, maybe excluding student loan debt for example. We are going to take the free money in our 401k match. So if our employer offers a 5% match or 3 grand, I’m going to put 3 grand into my 401k and take the $3,000 match from my employer, of course. If my employer offers a some other form of free money, like my old employer used to offer a stock purchase plan where I could buy the stock at a 15% discount and then sell it the next day as soon as I bought it for a 15% gain, that’s a really, that’s free money. I’m going to take that and I’m not really investing, I’m just delaying it for a little like I think it was one quarter. I would defer my money for one quarter, I’d buy all the stock, I’d sell it the next day and I get a 15% gain. Great. like I’m going to do that before I build cash. There’s not much in life that that gets better than that from a return perspective. And then I’m just going to build that cash position to prepare for my first house hack or one of these really high potential opportunities.

Mindy: What do you think, Mindy? First of all, I think this is a great plan for this specific scenario where he wants to reach early financial freedom as quick as possible and be saving for his house hack. So, step two, you say pay off bad debt. What does bad debt mean?

Scott: Anything over 8% is an easy answer to that. Some very aggressive people might say it’s over 9 or 10, but you’re somewhere in that range. Once you get over 8%, you got bad debt.

Scott: All right. So we got our 25, maybe 30,000 bucks. Now we’re going to be thinking about how do we move to part two? How do we move to $100,000? We are not going to be able to frugal our way. I love the FIRE community. I’m a part of the FIRE community. I think the world of this community, but there’s a little bit of rigidity in the FIRE community about the textbook and the rules here and a valid criticism that some people have of the fire community in my view is that they try to frugal their way to financial independence. And it’s just not efficient to focus on frugality for this extended period of time as the main driver. Frugality is important, we’re going to keep our expenses low, but now it’s time to layer in real bets on income generation and some side bets that can potentially move our move our position forward much faster. And that’s what we’re going to do here. Frugality is the first lever, but it is not the most important one over the long term. The most important one over the long term is income and the side bets that we make that can drastically propel our position forward.

Mindy: Yes, so I think that frugality gets confused with being conscious about your money. And I would encourage Joe and everybody who is following the same path with Joe to just be aware of where your money is going. You don’t have to be hyper frugal and, you know, eat in all the time. Just consciously realize that I am going to eat out once a week or twice a week and then make a plan to only go out to restaurants once or twice a week, whatever your plan is. I think that the the frugality, especially in the beginning of the fire community, it got equated to being conscious where your money is going. So don’t just spend willynilly, it’s so easy for money to fly out of your pocket when you’re not paying attention. So you don’t have to be frugal so much as just know where your money is going.

Scott: And I would even go so far as to say that frugality is not a virtue. Frugality is a lever on the financial journey and once you start prescribing it to being a virtue or a part of your identity, I think that’s where you’ve gone too far. And we’re going to be frugal because freedom and optionality is so much more important than the stuff we buy. But the goal is not to be frugal forever. The goal is to live the best life that we can, and this is where we’re pursuing financial independence to live the best life that we can. With that said, the largest expense in Joe’s life still, even with roommates, is going to be housing. If we can eliminate the housing expense and get that cost to zero or very close to it, we can dramatically accelerate our wealth accumulation for the next several years. And the way to do that is with this special type of purchase called the house hack, right? The house hack is simply buying a house with extra bedrooms or a duplex or a triplex or a quadplex, say two to four unit property and renting out the other units or bedrooms. And you’re still living the exact same lifestyle, right? You’re renting, you’re living with roommates before, now you’re still living with roommates or tenants, they’re just paying you the money and that can offset or entirely pay for the mortgage costs plus some. This was very hard to do um with a positive spread for the last couple of years. And in the latest couple of months in some markets like here in Denver, that’s begun to really open up to my observation where you can actually I think live for free again um if you make a really smart purchase and and look hard. This is a big decision. Joe is not going to just like buy a random house and live in it. Joe is going to become an expert as a real estate investor, read a bunch of books, meet with a bunch of agents, look at a bunch of properties and make a very calculated decision for this house hack. A property that he’s not going to mind living in, that’s going to has a very good shot at providing more rent than the mortgage and other costs to to manage the property. He’s not going to forget about things like vacancy expense or maintenance or CAPEX, he’s not going to forget about taxes and insurance as part of the PITI payment, but he’s going to he’s going to make these decisions, he’s going to buy one of the very best properties in his area. And that property is going to make sense as a long-term rental after he moves out of that property. So he’s going to have he’s going to take this house, live for free and in a few years have a cash flowing real estate investment in the new standing very high probability. If that’s not possible, then Joe’s going to cheat. So like let’s say he’s in a very high cost of living area on the west coast, for example, well, a lot of those areas have very stringent short-term rental laws where only the people who live in properties can rent them out. That’s a huge cheat code for someone like Joe who’s willing to be creative and find that opportunity to buy in there. He’s going to put himself in position to buy a house hack in whatever market that he’s living in. He’s going to save up cash to make sure that he has that that optionality. He’s going to fix up the place or be willing to do some of that work and he’s going to put himself in a position to live for free. Um another option here or spin on this is called the live-in flip. So let’s say that it doesn’t really make quite as much sense to buy a rental in a certain area. Well Joe can buy a property that needs a lot of work and over the next one to two years, fix that up on his nights and weekends. That’s his side hustle now. And then at the end of those two years, he can sell that property for a gain and for many people, the entirety of that cap gain in Joe’s case as a single individual up to 250,000 can be tax-free as long as he’s lived in it for two of the last five years when he sells it.

Mindy: Yeah, Scott, I want to make a couple of points. I want to just highlight what you said before. He is going to buy the best property in his area that he can. It is difficult to entice people to live in your house when it is a super dump. You’re also not going to make as much money in rent as you could if you were in a better location or you were not in such a great location like don’t buy the house next to the gas station, don’t buy the house on the busy street. Buy the house that you can consistently rent out because you don’t want vacancy, you want rent money every month. And with regards to the live-in flip, know your limitations on the projects that you can do. But you can combine the house hack and the live-in flip where you have a rental that needs a little bit of work or even needs a lot of work but is still habitable and then you rent it out to people that are handy and you ask them to help you with these projects and you pay them, you don’t take it off the rent, you want to receive the rent and then pay for the projects. And the reason you want to do this is your live-in flip is tax-free if you live in there for two of the last five years up to $250,000, but your expenses count towards your cost basis. So if you are paying somebody to do the work, then that’s an expense that you can take. So maybe you hit a amazing real estate market and you have $350,000 in gains, you would be paying taxes on that $100,000. But if you put in $100,000 to make the house the way it is, then that’s reducing and now you’re paying no capital gains.

Scott: This is not a move everyone can make, but it’s a move that Joe should be asking how do I make this work? Because unless Joe has some superstar career opportunity, like if you’re an investment banker and you have a path to making a million bucks a year, don’t house hack, right? Focus on making a million bucks a year and your probably very expensive market, live close to the office, which is going to be really expensive in downtown Manhattan or LA or whatever you are and go after that. But for the median income earner who is trying to figure out ways to get ahead here, this is going to be an incredibly powerful move and Joe needs to figure out how to put himself in position to take advantage of to turn his housing, which is his biggest anchor on his journey to financial independence, to his biggest propellant on the journey to financial independence. There’s a lot of ways to do this. The simplest is buying a multi-family property and offsetting most or all of the mortgage payment if he can, but if that’s not feasible, we got to get creative, right? The answer is how how do I do this? And if the if the answer is I live in San Francisco, LA, New York or some place where this is totally out of reach for now, then you better be having paths to make a lot more money in those areas if you want to get financially independent because that’s the advantage of those places if they have better income opportunities. So you don’t have to house hack, pursue those. If you can make 300 grand a year in San Francisco or whatever within the next couple of years, then that’s worth the opportunity cost of not being able to house hack. Just rent somewhere cheap with roommates. But but this is this is a path for much of the country that’s very powerful. Aside from house hacking, Joe is going to dramatically improve his skill set, right? In the end, we’ve talked about frugality, we’ve talked about house hacking, but it’s your journey is going to boil down to your how much income you can generate. There are no guarantees for how to increase your income. Let’s start with that, right? When you control your spending and you don’t buy a $15 beer at the ball game, you guarantee that you’ve saved 15 bucks. It’s a guarantee, right? You just know you’re going to keep it. There is no guarantee for how to increase income that I’m aware of. These are only probabilistic debts that we’re going to make. The best probabilistic debt to increase your income is to become more knowledgeable. Joe should read a book every single week. Just plop in an audible an earbud and audible, put it at one and a half two times speed and consume a book on business. Then one on personal finance, then one on self-development and goal setting, then one on economic theory, then one on um psychology, then one on how to have a good conversation, then read how to win friends and influence people. Just go after it one after another. You read 25 or 50 books and you work hard at your job, you will get promotions and raises and you will get opportunities and you will see the answers, right? If you read five books on management, you’re going to be more knowledgeable than most managers are on how to manage people. And that’s going to shine through eventually um for you. It may take you a little longer than you want, it may go rapidly. But this is a cheat code to getting ahead in the workplace. The next is going to be networking. Opportunities are created when you network. There’s no opportunity that’s going to present itself if you’re at home playing video games on Tuesday night, right? Drinking two beers, three beers, whatever it is, right? The opportunity is going to be presented when you go to the happy hour for the Denver startup or whatever it is, right? Or when you go out there and and ask some, you know, ask a colleague out for coffee and and ask them about their career and the history of this particular division of the business. You do that enough times, 70 to 80% of them are going to be a complete waste. They’re not going to go anywhere. The other 20% are going to provide weird opportunities for you that you wouldn’t have foreseen otherwise, right? You have to keep putting yourself out there over and over and over and over again, asking how you can add value to people, and eventually that comes back to you in unpredictable ways. And the last is going to be intentional skill development, right? It’s not enough to just passively absorb information and network, you also got to develop some hard skills that do translate. Like, think about this as your toolkit, right? I when I was CEO of Bigger Pockets, I thought about my CEO toolkit. What is a strategic plan? What does a board deck look like? What does a delegation of authority who makes what decisions look like? What does a good performance management process including a performance review look like? But Joe should develop the skills that are relevant to his world, whether that’s learning a new a new programming language, whether that’s getting one of those licenses we talked about earlier. There’s got to be some process on a reasonable periodic basis of developing these hard skills. You do those three things, your income will increase, and it will increase much, much faster than the average person’s.

Mindy: I think this is great. Um I want to encourage Joe to talk to his boss, have some conversations with your manager about what it is they’re looking for and how you can get promoted. Because nobody else is doing this. First of all, your boss is going to give you an idea of what it is you’re supposed to be doing. It might not be what you think you’re supposed to be doing. Just having that knowledge is going to help him when it comes time for a review. But also, Joe, keep track of all of your accomplishments. It feels a little braggy to like keep a spreadsheet or like a scorecard. Oh, I did this, I did this. Keep track of that and anytime anybody emails you, ‘hey Joe, well, job well done. Thank you so much, you were so helpful, whatever, put that into a folder in your email inbox that’s called bragging or, you know, praise, or whatever it is you want to call it, so that you can have those at your fingertips for your review. Even a little bit early, give that to your boss in advance, so they are aware of how great all the other people in your company think you are. So that when it comes time to give you a raise, give you a review, they’re giving you great reviews and they’re giving you the top amount of the raise that they can.

Scott: Can you imagine Joe who’s like pretty aggressive about his finances buying a Corolla, right? And not knowing whether the Corolla was worth $7,000 or $18,000 for the 10-year-old maker model, right? It’s just it’s a preposterous consideration. He’d never pay $18,000 for that vehicle. He’d pay much closer to the seven or $8,000 number for that vehicle, right? Joe is going to get that sophisticated and that clear on what his compensation should be for the job he’s doing, right? Like it’s it’s it’s that simple. And you just update this very regularly. This is your asset. So if you are a financial analyst and you are doing a certain type of work, you should know when and where you’re ready for financial analyst 2 or a finance manager or a finance director or whatever that is and you should have that very clearly defined in your head and be clear about what is needed from your boss to get there. And then you need to make a rational assessment. Is my boss going to give me that in a realistic timeline that I think is fair? Or should I go look at for an opportunity that will? That’s it. You’re going to do that at all times and you’re going to get there much faster than most people because you’re reading all these books and developing the hard skills at that pace. Now, the other thing that’s going to happen here is at some point for a lot of Joes, you’re going to you’re going to sit there and you’re going to be like, well, the Fortune 500 company I work at just ain’t going to promote me to finance director, even though I clearly have the skill set of finance director because I’m a financial analyst one and I’m one year out of college. Right? It’s just not going to do it. It it would be ridiculous, it would kind of disrupt the culture there. It would it would make a lot of people angry or whatever. So you’re going to have to consider how can I apply that skill set to something that has better opportunity, right? There are 185 companies, this is from years ago, when I was when I was looking I looking at this. 100 185 companies that were unicorns valued at a billion dollars plus. Now there’s thousands, right? Um in there. But you know private companies. When you join a startup, there’s a chance it will fail, but there’s also a chance it will win. And if you’re making 80 grand at the Fortune 500 company and the startup’s going to pay you 70, but it’s got a chance to succeed in a really big way. That’s an opportunity that Joe can take that his peer who’s 10 years older and locked into the house and the car and the the family, cannot and Joe should take full advantage of that and think about when it’s time to jump ship to something that does have that opportunity upside. That’s what I did with Bigger Pockets, right? I was working at Dish Network. Dish Network was fine. It was just wasn’t going to propel me forward toward financial independence. Bigger Pockets was a small business that could potentially have done that and it did. And yeah, I got lucky. But there’s no way I would have gotten lucky if I’d stayed, right? And that’s the that’s the evaluation Joe’s going to have to constantly have here. And again, as you take that more high risk venture, join that small company or maybe go into the sales or commission role, you can increase your odds of succeeding because you’re self-educating, networking, developing hard skills, and you have that higher risk tolerance because you have cash in the bank, you don’t need that base salary every single month coming in the way everybody else does. You can afford to take a few months to let something ramp, an opportunity to materialize. How am I doing, Mindy?

Mindy: I think you’re doing great, Scott. I love every aspect of this and I hope that all the Joes that are listening right now are really taking this to heart. I’d also like to encourage them to to really think about the benefits going forward of taking this course of action right now. Scott, you had the opportunities available to you because you did all of these things. You were able to take the job with Bigger Pockets and, you know, gamble for a lack of a better word on this internet startup that could have just easily failed and then you were out a job and you have to, you know, scramble to get a job. Except you don’t really have to scramble to get a job because you’ve got this big savings account that’s going to allow you to figure out where you’re going to go next as opposed to, let’s Shane, who is not doing any of this, spending all of his money, still loses his job and now he has to scramble to get anything because he has no savings whatsoever.

Scott: All right, we’re going to take our quick final ad break after this.

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Mindy: Thanks for sticking with us.

Scott: So, that’s the part two. That’s how we’re going to get to 100 grand. We’re going to scale our income, we’re going to grind it out, we’re going to keep our housing expenses low and we’re going to house hack and we’re going to get there. Moving on to part three, how are we going to get to a million bucks, right? And this is where we have both the process and the event, right? So I I put together this financial model for a very not a conservative, um there’s there’s a little bit of aggression here, but Joe’s a high performer and and should be able to achieve something like this as he approaches 30, right? Starts at this median income of 62, he gets a raise of 3%, then he gets a promotion in year three, another 3% raise, then another promotion in five years, then a nice raise, then another promotion at year seven and he barely gets to 100 grand by year eight, right? This is a good career path but it’s not something that Joe shouldn’t expect to some degree um given his skill set and getting a median income job out of college and getting going in a reasonable start of a career. He’s also got a side hustle that he that he pursues there. If he does all this, I have a complicated model, you can beat it up later, and he invests in the stock market at 10%, he’ll get about five, he’ll generate about $537,000 by year eight when he turns 30, right? That’s good. He’s getting rich for sure with this model. We want that as part of our plan. It’s a base case, it has to be there. But you’ll notice that this is not the million dollars that I promised Joe um at the beginning of the presentation, right? It’s far short of that and ain’t nobody retiring in eight years on $537,000 in total net worth. Maybe you can call it self coastfire or whatever, but that’s not what we set out to achieve here. We need more than that, right? So and this is again where where I have a problem with some of the the the discussions in the FI community is a lot of people’s plan is this and then you got to drag this column out for another 10, 15 years of grinding it out with low expenses in order to achieve fire, right? You want that in there. If it takes another 10 years, that’s fine. You’re you know, it’s still better than not retiring early like most people do. Um and then you’re going to be 40 at that point. But we want to get there at 30, we also need to layer in the events. So this is where one of my favorite little quips is, you know, apparently nine out of 10 businesses fail or that’s a commonly stated statistic, maybe it’s made up, I don’t know. But if that’s true, then the logical response is to start 10 businesses, right? Let’s take a lot of these bets, right? So if we add in to this base plan, you know, a house hack. What happens? Does Joe get 3, 400,000 more dollars, you know, over the course of the next eight years? What if he does three house hacks? So easy to do three house hacks over eight years, right? Um for Joe. What about three live in flips? It’s one every two years, super achievable for someone like Joe uh on this journey. What if he joins a startup or a small business that pays him 10% low less base salary, but it has a 40% chance of paying out several hundred, thousand in equity in five years. That’s not unreasonable. Millions of people have had that outcome happen. What if Joe buys a business in year four? What if he’s worth a couple 150 grand and he says, you know what? None of these other things are working out. The small business I joined and or whatever isn’t working out. The house hack is is good but it, you know, I’m I’m living frugally. I’m going to I’m going to try my own my own business. I’m going to buy a small a small business Cody Sanchez or Alex Formo style and see what that looks like um on there. That could dramatically improve things. What if Joe tries a new side hustle every 90 days and nine fail? Well, over five years, two are going to work generating hundreds or thousands of dollars in passive income or giving him some potential of an asset to sell for a couple hundred grand potentially or more that would do that. Over the next eight years, a collection of low risk, high upside bets like those are highly likely to provide some kind of payout. An intelligent collection of such bets can add a massive boost to Joe’s position. Joe could far surpass that $500,000 base scenario over the next eight years. I wouldn’t bet on any single one of these, but I will absolutely bet on the aggregation of a collection of bets made over five to eight years by an avid reader who spends a lot less than he earns, that something’s going to pay off and accelerate this position pretty dramatically. And there’s nothing that really constrains Joe from doing all of the things I suggested over an eight-year period. Eight years is a lot of time. Like if Joe does all of those things, surely some combination are going to work. And again, you don’t have to depend on any of these. You don’t want to put all your cash or all your eggs into one basket, but you’re naive if you think that this is not going to work on there. This is how people join the top 5% or the top 1% of wealth, even if they start from a position that doesn’t have anything particularly special about it. Um no family wealth or money that has been passed down, for example. So those who understand this framework become financially independent early in life and those who don’t will drag out a financial model over 30 years in a spreadsheet and sit in an office doing that. Nothing wrong with that, but this is the difference.

Mindy: What do you think, Mindy? I think this is really, really doable. I can hear somebody saying, ‘Well, you can’t do three live-in flips in eight years.’ Yes, you can. I’ve done it myself. I know that you absolutely can do it. It’s a lot of work, but Joe is trying to take his, what is that? A 40-year career and cram it down into eight. So, yeah, you’re going to have a little bit more work to do.

Scott: That’s it, right? You want to retire early, you’re going to have to do something different. That’s it. That’s the difference, right? It’s low cost of living and a more aggressive base case than most. And a collection of side bets. And I’ll tell you what, you can have just as much fun doing these things, right? When you have a house hack, guess what? You don’t have a landlord. So you don’t have a lease. You can move whenever you want after that first year commitment from the mortgage and you can throw as many parties as you want in your house and no landlord is going to call you uh complaining about it, right?

Mindy: Your neighbors might not be happy.

Scott: used to date our friend who does flips. There was a huge party before he demolishes the place, right? In in a couple of those. Like you can have fun doing all these things. It’s not like this is all work and no play here on it. You can have just as much fun as anybody else while you’re pursuing this and get way further ahead. So I want to revisit something here. If you are going to do more of a process towards financial independence. Let’s say that Joe develops his hard skill and starts making three $100,000 a year by year five, or has a realistic path to doing that in year five, six, seven. Then go with the process. Then, you know, if you’re making 300 grand a year, it doesn’t make sense to do some of these other things. Um quite as much. You can spend more and just coast to financial independence pretty early, right? So if that happens and you do start seeing your income ramp, then follow the process-centered order of operations, right? And this is a very traditional style of investing where you’re going to have a $1,000 emergency buffer, paying off high interest rate debt, just the same things we talked about, taking the 401K match, taking an employee stock purchase plan, fully funding your emergency fund, and then you’re going to go down the ladder and max out your retirement accounts. If you’ve got an HSA, you’re going to max that, then you’re going to do your 401k, then your Roth. If you do, if Joe does have kids in the next couple of years, he’d he’d max out the 529 or 529 plans for those kids. Then finally contribute to after tax brokerage account and then pay off his low interest rate debt. So that’s if we start seeing our income start to grow and our like, I don’t have to mess with all these other crazy side bets because my core job is paying me so much that I’m going to get there real easily, right? That’s great. That’s what we do. We follow the traditional the traditional path here.

Mindy: Um, both of these say process-centered journey. Do you mean events-centered journey on the other side?

Scott: Yes, so sorry. This this this word here for the events-centered journey, right? Let’s say that Joe is not seeing his income boost and he’s still making below six figures in years three, four, five, six. Then I’m going to encourage Joe to go for a more events-centered order of operations, which is where we’re still going to have the $1,000 emergency buffer, we’re still going to pay off high interest rate debt and we’re still going to take our 401k match and employ stock purchase plan if available. But then we’re just going to accumulate cash. We’re going to accumulate cash and we’re going to put that towards the next house hack or the next live and flip or the next business debt, something that could work and we’re going to keep trying those very intelligently um for at least the next year or three or four while we really exhaust our options of side bets here and really play our hand to the best of our ability. and once something starts to hit and our income starts to really begin to ramp, then we just revert back to going down the traditional retirement sack. That’s it, right? So we’re just doing the process, we’re doing the events-centered order of operations where we accumulate cash until we’re able to successfully deploy the advantages we have as a young, single person with lots of opportunity and and and time to pursue good ideas. Once something works, let’s take advantage of all the tax cheat codes. And the reason I’m I’m going into that a lot is people say I’m against retirement accounts. I’m not against retirement accounts. I just think that Joe is going to benefit more from cash in these early years than he will in the retirement accounts until he hits a few winners and has more cash than he can really reasonably deploy on alternatives. From an investment standpoint, we’re going to be really aggressive, right? There’s no everything screams be aggressive, Joe. Be be aggressive. Joe has both a lifetime to accumulate wealth and he wants to maximize the probability of generating a lifetime of wealth early on. So that there’s only one option, right? A bias towards the highest returning long-term investments that we can get. Right? That’s probably going to be a a common answer to that is going to be passively managed broad-based low fee stock market index funds like Vanguard’s VT SAX or VTI for the for the uh ETF version. That’s a very popular choice and for good reason. And while many will just choose 100% stock portfolios, especially if Joe is able to get a high income um generation early on or get on that track. That’s fine. You can also responsibly leverage real estate and you can invest in private ownership in businesses um to get the FIRE. Those are probably going to be his three best options. Although plenty of creative Joes out there find other ways, other things to invest in. Joe’s probably not going to invest in bonds or other forms of debt. They’re likely too conservative or low yield for most and um to get higher returns in debt, you generally need capital to buy non-performing or higher interest rate debt. And Joe doesn’t have a capital right now. So he’s probably not going to use this as a as a top tool. Maybe he’ll use it towards the end of his journey. Crypto and other alternative investments are likely to be red herrings. I think they’re distracting, they’re tempting, but I think ultimately they’ll be lower probability. A lot of Joes will disagree with me and allocate here despite my my my comments on that on that stance.

Mindy: What do you think about this? Is this the right approach for Joe? I think that this is a great approach for Joe. Again, if he wants to reach early financial freedom for him to hyper focus for eight years and then he’s got the rest of his life to do whatever he wants.

Scott: Yep. Pretty good. Just in case he’s wondering, right? Joe is probably watching this and he’s not 80% of the way to his fire number, but if he is and he’s getting there and he coming back and looking at this. Um you’re going to remain aggressively invested until you’re about 80% of the way to your number. So let’s say you want to you got a million dollar fire number, you know, when you’re at hit $800,000, you’d pivot from this very aggressive phase one portfolio to a more conservative retirement ready portfolio. And that a retirement ready portfolio might look something like the risk parity portfolio that we did recently with Frank Vasquez, where we have stocks, bonds, alternatives, managed futures and some international exposure. But we pivot to this more diversified, uncorrelated portfolio that will probably produce lower returns over a long period of time, but can support a higher distribution rate, a higher retirement withdrawal rate. So we’re we’ll pivot to that at that point. So if your goal is a million, you do that at around $800,000. If your goal is two and a half million, you do that around um 2 million in that worth. You begin the transition here and there may be tax things to consider. You can you can get the you can complete the transition by selling some things and repositioning or you can allocate new dollars or cash flow from your portfolio to the more diversified positions at that point in time. So that’s what I got. That’s the plan. I do have a couple of additional considerations but any early reactions so far?

Mindy: I think this is a great plan for somebody who is in their early 20s, who wants to reach early financial freedom in an aggressive timeline. I don’t think this is quite the right approach for somebody who just wants to get coastfy, maybe they love their job, maybe they’re super excited to work for a long time. But Joe isn’t. Joe really wants to get there as fast as he possibly can. I think this is a great plan for him.

Scott: By the way, I I would recommend that more people pursue this because again, I do not think it precludes having fun, getting ahead in other areas of life, experiencing life, experiencing where you live. I think you can do both and I think it’s so great and so powerful to be financially free early in life. The options are awesome um at that point when you get to the other side. It’s it’s really, I think it was absolutely worth it to do to follow a plan very similar to this in my personal life. So some additional considerations and optional homework. One, define your why. This is a fluffy thing. I can see some people rolling their eyes. I used to roll my eyes at this, but you got to do it. You got to do the fluffy work of visioning or whatever you want to call it, whatever the synonym is here, because you’re about to commit yourself to a pretty long-term plan that’s going to integrate in every aspect of your life, right? Where you live, what you eat, how you what you get around in, what you do for work and how you spend certain amount of your free time. And knowing why, knowing that there is a light at the end of the tunnel, that this will improve your life every single year as your wealth builds, giving you more freedom and flexibility and helping you realize your potential, all that’s really important to put down to paper and revisit from time to time um because you’ll get distracted in the in the in the meantime by by the shiny objects um and there. Hey, that guy drives a nice car. That sounds fun. It is fun, but it’s not nearly as fun as being financially free at the end of that and having those options. And I think you also want to make sure you don’t become someone you don’t want to become, right? So again, that’s a criticism that’s valid of the fire community is they’re a bunch of frugal wackos. We’re not all frugal wackos um here. But again, frugality is not a virtue. Frugality is a tool that we use to achieve freedom um in there. And freedom is worth more than many material goods, but it if you have the means, there’s no reason not to also enjoy the material abundance that this world offers these days. Next up, I would suggest you get a system for planning your year, quarter, week, month and day. I’ve used this book called Living Your Best Year Ever from Darren Hardy. Love Darren Hardy, love this book. I have no affiliation with him whatsoever. But I’ve I’ve filled out this book every year for about 10 years now. And I plan out my annual goals, my quarterly goals and every week, I have a little log here that says, you know, here are my top three goals, what I need to do for those top three goals this week and my habits that I want to pursue. I’m not perfect about achieving all the things in my in my log. I’m not perfect about filling it out every single week, but boy, does a pretty high level of consistency at this simple act of planning my week make an enormous difference over time. I never go months not progressing on the most obvious ways to get ahead on my my key goals. So whatever you choose, there’s cheap ones like this I’ve never used the life designer. You don’t have to use living your best ever or anything. But pick something that is a system that you can stick with and you do that, it’s going to make an enormous difference in your life. Don’t have more than one goal be financial as well, right? Something’s got to be what whatever else you prioritize, spiritual, relationships, health, business, whatever it is that you’re your impact, whatever you’re looking to to do, make only one of those um financial during this journey.

Mindy: I love it.

Scott: Next homework assignment is measure and track. You got to create a PFS, a personal financial statement. This is going to list all your assets and liabilities, it’s going to compute your net worth and financial portfolio. It’s going to list all of your income sources and expenses, and it’s going to project give you an idea of how much you can accumulate for the next year, right? That’s what we did today. We said here’s how Joe can can accumulate $30,000. You need to have some tool that does this. You can do this on pen and paper, you can do this on a spreadsheet, but if you’re 22, you’re almost certainly going to be using a professional app. And our favorite of those is Monarch Money. They are a sponsor of bigger pockets money. They’re also the tool that I’ve used for years, long before they became a sponsor of of Bigger Pockets money. Mindy shows you how to set that up with her personal net worth of several million bucks um on there uh on a recent video which which was pretty cool. And uh we have a deal with them where if you use the code Pockets, you get 50% off the first year, which is 99 bucks. So 50% off 99 bucks uh for that first year if you use the code pockets. Boom. That’s our favorite one, but you can do this a number of ways if you want to do this. You just if you want to play the game, you got to keep score.

Mindy: And Scott, what I love so much about Monarch money is that it is a snapshot of your entire financial picture. You go to the dashboard, you open it up, there’s your budget, there’s your spending, there’s your net worth, and there’s your investments. You can see I’m down today because the market is having, you know, not such a great market. I can see that my spending has really ramped up this month, but also I’m building a house so, you know, that’s to be expected. There’s my net worth. a monarch, you have to attach all of your accounts, otherwise it’s not going to work so great, but it is so important to just see this really quick snapshot of where you’re at. And you don’t have to spend a ton of time on it uh once you’ve set it up. So it’s just it’s such a great tool.

Scott: Love it, yeah. My favorite tool, used it for years and years now. And then I think the next one is create a written plan. You don’t have to use this one, but this is the hopefully a starting point for for a lot of people on this is like, hey, what I’m going to do this next year is I’m going to accumulate 25, 30 grand. I’m going to, you know, do whatever it takes to do that. Then I’m going to find some side bet, some move I can make that could win beyond what is a normal career progression here. Then as I accumulate more wealth, I’m going to layer in a more formal process for taking calculated bets every single quarter or every single year that can get me ahead while continuing to pursue my base case and allowing that to compound. Right? That’s my favorite one. And then last, I think it’s embrace community and education. I I debated about whether to do this, but I’m going to shamelessly self-promote. I I wrote a book called Set for Life. It’s this plan in great detail. Mindy’s got the original one there with the light blue. I have an updated edition from two or three years ago and I’ll probably update another one in another a couple of years with uh just adjusting for inflation and some updates and those kinds of things. But I I do think this is a good tool for somebody in Joe’s position. Um it’s literally written for exactly that purpose, someone in their 20s or 30s who wants to get ahead early in life and wants to go all out in their approach to early financial freedom. If you are looking for the best process book for someone who just wants to, doesn’t want to lay on all these side bets or whatever, just want a reinforcement of what is the best way to get rich for sure over a long period of time. Simple Path to Wealth is my favorite one by JL Collins. I recommend the audiobook version of that in particular because he sounds like James Earl Jones, um who is Mufasa from Lion King if you’re if you’re not familiar.

Mindy: And Darth Vader from Star Wars.

Scott: And Darth Vader from Star Wars. Yeah, you’re probably familiar with Darth Vader if not, you’re not with with Mufasa. You’re you’re definitely familiar with Mufasa and Darth Vader. Yeah, so JL Collins has an even better voice than than uh those guys and he’s been a guest here on Bigger Pockets Money several times. We are going to of course promote our own podcast and our Facebook group. This is a lot of like-minded people here uh in this world. And if you’re looking for even more depth, there’s the /r/fire community. Um there are even subcategories of that for people who are pursuing lean fire, which is a lower net worth version of fire, or fat or chubby fire, which are have greater net worth. There’s also the ChooseFI Facebook group and they choose a FI podcast. I can also shout out Afford Anything as another podcast. There’s a ton of really good resources out there um for folks looking to do that. But if you do want to join the community here at Bigger Pockets Money, the best way to do that is go to biggerpocketsmoney.com and just sign up for our newsletter. We’ll send out every week, sometimes twice a week, um updates on what we’re doing from the podcast, any ebooks that we produce, resources like this financial plan which you can download at biggerpocketsmoney.com. This presentation will be available at Bigger Pockets Money. You can find all this a bunch of great resources there and we’ll be building that out over the next year with more and more good stuff.

Mindy: Scott, this was a fantastic presentation. Thank you so much for taking the time to set this all up. I think this will be super helpful for our younger listeners. Um again, if you have a younger person in your life, late high school, early college, just graduated college. This absolutely is the presentation for them. This can be life-changing for them because if they’ve never heard this before, they don’t know that you can retire early. Scott, this was fantastic, but I think it’s time to get out of here.

Scott: Let’s do it.

Mindy: All right. That wraps up this episode of the Bigger Pockets Money Podcast. He is Scott Trent. I am Mindy Jensen.

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Mindy: saying gotta jet.