00:00:01
welcome to the best interest podcast
00:00:04
where we believe Benjamin Franklin's
00:00:06
advice that an investment in knowledge
00:00:08
pays the best interest both in finances
00:00:11
and in your life every episode teaches
00:00:13
you personal finance and investing in
00:00:16
simple terms now here's your host Jesse
00:00:20
[Music]
00:00:22
Kramer hello everybody and welcome to
00:00:25
episode 54 of the best interest podcast
00:00:28
my name is Jesse Kramer
00:00:30
today we're going to talk all about fire
00:00:32
the fire movement Financial Independence
00:00:35
retire early if you're a personal
00:00:37
finance afficianado you probably know
00:00:39
about fire in some way but if not this
00:00:41
episode will get you up to speed and
00:00:43
we're bringing in an expert later his
00:00:45
name is Brad Barrett he's the host of
00:00:47
the choose fi podcast one of if not the
00:00:50
most popular personal finance podcasts
00:00:53
out there and Brad is going to sit down
00:00:55
with us to explain his view of the FI
00:00:58
movement of the fire movement and a
00:01:00
little bit about how he achieved
00:01:01
Financial Independence himself so really
00:01:04
excited to bring Brad on to the podcast
00:01:06
but first let's define what Financial
00:01:09
Independence is let's get into a little
00:01:11
bit of the numbers themselves the
00:01:12
objective numbers about how you can
00:01:15
achieve Financial Independence in your
00:01:16
life and then a little bit of the why
00:01:19
you know a big question why pursue
00:01:20
Financial Independence in the first
00:01:22
[Music]
00:01:28
place
00:01:31
okay so for starters let's talk about
00:01:33
the fire movement f i Financial
00:01:36
Independence retire early if you are a
00:01:39
personal finance nerd you probably
00:01:41
already know about fire but let's let's
00:01:43
get you up speed if you don't know what
00:01:45
fire is the main idea is quite simple if
00:01:48
you save enough money then you can cover
00:01:50
all your living expenses via interest or
00:01:53
gains from your Investments that's
00:01:56
Financial Independence you have enough
00:01:58
of an investment Bank put away
00:02:00
that the growth the year-over-year
00:02:01
growth of your investments will
00:02:03
completely fund your lifestyle you're no
00:02:05
longer living off of a paycheck you
00:02:07
don't need to hold down a job because
00:02:10
you're living off your investment
00:02:12
interest or your investment growth it's
00:02:14
definitely possible to reach fi before
00:02:17
traditional retirement age so some
00:02:20
people who reach fi they choose to
00:02:21
retire early re getting us the full
00:02:24
acronym f i e so let's do a little bit
00:02:28
of quick starter math uh imagine if you
00:02:30
saved a million dollars I know it's a
00:02:32
lot of money but over the course of a
00:02:33
career saving a million dollars is very
00:02:36
achievable and then you assume that your
00:02:38
$1 million Nest Egg Grows by a net
00:02:41
average of 4% per year and we're going
00:02:43
to come back and dig into the details of
00:02:45
that 4% number but 4% is a fair slightly
00:02:48
conservative growth amount 4% of 1
00:02:51
million is $40,000 per year so
00:02:55
essensially if you could live off
00:02:57
$440,000 per year you could live off
00:03:00
your investment interest Forever Without
00:03:03
ever tapping into the original $1
00:03:05
million it's time back just to you know
00:03:07
figure out what you're going to do with
00:03:08
all your retirement time uh it's simple
00:03:11
but that is fire in a nutshell if
00:03:14
there's any one takeaway just remember
00:03:16
that math example you know 4% of X gives
00:03:19
you a certain amount to live off per
00:03:21
year however we're going to start to
00:03:24
caveat that statement a little bit and
00:03:26
we are going to break down in detail
00:03:27
later where that 4% number comes from it
00:03:30
comes from something called the Trinity
00:03:31
study and we're going to talk about why
00:03:32
the Trinity study actually is very
00:03:35
misunderstood by the fire Community it's
00:03:37
understandable why unfortunately uh the
00:03:40
fire community that you know we we want
00:03:42
to break things down into simple terms
00:03:43
so people can understand them and the
00:03:45
four% rule is one of those shorthand
00:03:47
simple terms however there's much more
00:03:50
Nuance to the 4% rule than the average
00:03:52
person thinks so if you are a DIY type
00:03:55
investor maybe you're younger and you're
00:03:58
starting to plan out your retirement in
00:03:59
your own head you're starting to figure
00:04:01
out how much you need to save for that I
00:04:03
highly recommend you wait till later in
00:04:05
the episode when we dig into the details
00:04:07
of the 4% rule because it's it's really
00:04:09
enlightening and important that you
00:04:10
understand that but first let's talk
00:04:13
about why fi is great even if you don't
00:04:15
reach full
00:04:20
fire the tenants of financial
00:04:22
Independence are essentially that you
00:04:24
should save more money and spend less
00:04:27
money and that's terrific advice it's
00:04:29
kind of like saying eat more vegetables
00:04:30
odds are that advice applies to you even
00:04:33
if you're already doing enough of it
00:04:34
doing more of it is only helpful one of
00:04:37
the main ways we accomplish that is
00:04:38
essentially just by living a Frugal life
00:04:41
trying to save more of our money and
00:04:43
spend less of our money one of the most
00:04:46
important ratios in fire in the fire
00:04:49
movement is called your savings rate
00:04:51
your savings rate essentially says how
00:04:53
much of your income are you saving out
00:04:55
of every paycheck or you know you can
00:04:57
approach it the other way how much of
00:04:58
your income are you spending spending
00:04:59
out of every paycheck and the higher
00:05:03
your savings rate the more quickly you
00:05:05
will achieve fire and the reason why is
00:05:07
it's almost a two-fold reason it's kind
00:05:09
of important to understand because on
00:05:11
the one hand if you're spending less
00:05:13
money now of course we know that means
00:05:16
you're saving more money so that's good
00:05:18
but also if you're spending less money
00:05:20
that means that in your retirement you
00:05:22
will need less money to live off every
00:05:25
week every month every year so not only
00:05:27
do you save faster but it also means
00:05:30
that you need Less in the long run
00:05:33
pursuing Financial Independence it
00:05:34
requires knowledge of your Investments
00:05:37
of your retirement accounts of some
00:05:38
basic financial math so even if the full
00:05:41
fire experience isn't quite for you the
00:05:44
basic behaviors behind the movement are
00:05:46
generally helpful to anyone's personal
00:05:48
finances so even if you want to work
00:05:51
until you're 60 years old even if you
00:05:52
have no real dreams of retiring at 40
00:05:55
and traveling the world understanding
00:05:57
Financial Independence has some benefits
00:06:00
of course no movement like fire is
00:06:03
without some sort of criticism on the
00:06:05
whole I do think the fire movement
00:06:07
suffers a bit from survivorship bias
00:06:10
survivorship bias occurs when a
00:06:12
conclusion is drawn based on incomplete
00:06:14
data because some of the data has
00:06:15
survived a certain selection criteria
00:06:18
while other absent data has failed that
00:06:20
selection criteria so the fire stories
00:06:23
that make headlines in say Forbes or
00:06:25
CNBC they sound amazing they sound
00:06:28
awesome but playing a little bit of
00:06:30
Devil's Advocate here the stories on
00:06:32
Forbes and CNBC are the ones that have
00:06:34
survived for Forbes or CNBC to discover
00:06:37
them and to discuss them those typical
00:06:39
success stories they are similar in some
00:06:42
pretty striking and obvious ways in many
00:06:44
of these stories we have a young Highly
00:06:46
Educated person working a high-paying
00:06:49
job you know frequently with some sort
00:06:51
of Silicon Valley esque flavor to it
00:06:53
maybe they're a programmer they work you
00:06:55
know as a project manager at Apple
00:06:57
something like that they do live very
00:06:59
frug which is terrific for them they
00:07:02
make some pretty smart sometimes lucky
00:07:04
Investments you know sometimes lucky
00:07:06
meaning like maybe cryptocurrency is
00:07:07
involved or in the past 10 10 12 years
00:07:10
we had this historic bull market in the
00:07:12
stock market and and many new FES were
00:07:16
big investors in that stock market good
00:07:18
for them and they end up retiring around
00:07:20
age 30 or 35 or 40 and the way that
00:07:24
these articles or stories are laid out
00:07:26
sounds pretty easy it's like kind of one
00:07:29
2 3 4 so the job itself they're making
00:07:31
200 Grand a year that's a wonderful
00:07:33
start but that's not a realistic salary
00:07:36
for about 99% of the US population
00:07:38
Frugal Living we have talked about
00:07:40
Frugal Living before here on the best
00:07:41
interest podcast you can eat a lot of
00:07:44
ramen you can make some active decisions
00:07:46
to save more money I think that's a
00:07:47
really smart thing to do at the same
00:07:49
time it's hard for normal people to save
00:07:52
30% or 50% or 70% of their income and
00:07:56
that is something that a lot of the fire
00:07:58
people are able to do for starters it's
00:08:01
because they earn so much and then on
00:08:03
the back end they do make some
00:08:04
sacrifices in terms of their lifestyle
00:08:07
the smart and lucky Investments okay we
00:08:08
already touched on that but a lot of the
00:08:10
FES they have stories where perhaps they
00:08:13
bought their home during the previous
00:08:15
recession or they invested a ton of
00:08:17
money around 2008 2009 when the market
00:08:19
was low or perhaps they they started a
00:08:23
business on their entrepreneurial or
00:08:24
they invested in some startup that's
00:08:27
amazing that's not necessarily something
00:08:29
that the average person can assume will
00:08:31
also happen for them and then there are
00:08:33
some glaring omissions when it comes to
00:08:36
the typical or at least a common fire
00:08:38
lifestyle for example frequently people
00:08:42
who Achieve Financial Independence
00:08:43
especially at the super young ages they
00:08:45
do so without children in the picture
00:08:47
and children are quite expensive in fact
00:08:50
I I recently saw a stat unverified but I
00:08:52
do think it's seems reasonable and it's
00:08:54
something that I'm kind of putting a
00:08:56
little flag in the ground and and
00:08:57
keeping it in mind and the stat is that
00:08:59
the net present value of having a child
00:09:02
and then the cost of that child over the
00:09:05
subsequent 18 years is about
00:09:07
$400,000 right kids are really expensive
00:09:10
but kids aren't always in the equation
00:09:11
when it comes to financial Independence
00:09:13
really hard luck bad luck scenarios
00:09:16
don't of often come up in the most
00:09:17
famous fire stories in fact it's it's
00:09:20
good luck that makes for young
00:09:24
FES Average Joe's average Janes the
00:09:26
people who are you know I'm a
00:09:28
firefighter and I'm married to a teacher
00:09:30
they're rarely retiring at age 32
00:09:33
because I mean who doesn't like the idea
00:09:35
of retiring at age 30 and living the
00:09:37
exact same lifestyle or that preferred
00:09:39
lifestyle that you want to live of
00:09:41
course it sounds amazing but there
00:09:43
aren't many fire stories of you know
00:09:45
hardworking pipe fitter Works 20%
00:09:47
overtime and retires at 36 that's not
00:09:50
that common instead there's a kind of a
00:09:52
luxurious combination of elite earning
00:09:55
power really smart saving Frugal choices
00:09:58
sometimes a little bit of luck involved
00:10:00
that doesn't happen to everybody and
00:10:02
then in some cases not in all cases the
00:10:06
fire movement really feels like a rat
00:10:08
race fire hopefuls perhaps brag is the
00:10:11
wrong term but for lack of a better term
00:10:13
they brag about their monthly savings
00:10:14
rates constantly living in the future
00:10:17
you know five years until I'm fired five
00:10:19
five years until I'm independent
00:10:20
financially independent and I'm counting
00:10:21
down the days burning the candle at both
00:10:24
ends to both reduce spending and
00:10:25
increase earnings so I'm not to be an
00:10:29
evil fireman here quenching people's
00:10:31
fire dreams I do think fire is actually
00:10:34
a great idea especially I think the
00:10:35
financial Independence part of fire is a
00:10:37
terrific idea but I do think that the
00:10:39
typical fire stories that we hear from
00:10:42
the media are described in an
00:10:44
unrealistic and and myopic manner I do
00:10:47
think that there are much more generally
00:10:50
applicable fire stories out there
00:10:51
including some that we're going to hear
00:10:53
later from Brad Barrett and that Brad
00:10:55
frequently talks about in his podcast
00:10:57
that are much more realistic examples of
00:10:59
how normal people can achieve
00:11:01
[Music]
00:11:05
[Applause]
00:11:06
[Music]
00:11:12
fire a friend of the best interest
00:11:14
Christian Christian actually just got
00:11:16
married this past weekend so
00:11:17
congratulations Christian but Christian
00:11:19
has said to me before you know Jesse I
00:11:21
really like your philosophies but I'm
00:11:23
also interested to know what actions
00:11:26
what direct actions can I take to apply
00:11:29
philosophies in my own life so to honor
00:11:31
Christian let me try to give you some
00:11:32
actions that you can apply to accelerate
00:11:36
your your trip to financial Independence
00:11:38
so for most people the idea of retiring
00:11:40
at 30 or 35 is not reasonable it's like
00:11:43
that kid in high school with with no
00:11:44
rhythm and no voice who adamantly
00:11:46
pursued his dream of being the next
00:11:48
Michael
00:11:49
Jackson now there's nothing wrong with
00:11:51
wanting to be famous or wanting to be a
00:11:53
movie star wanting to be a rock star but
00:11:55
at some point we all have to look
00:11:56
ourselves in the mirror and face reality
00:11:59
unrealistic dreams I say are fruitless
00:12:02
so if this podcast has you interested in
00:12:04
fire absolutely pursue it but make sure
00:12:07
you set realistic expectations so in my
00:12:10
opinion you should think about fire as
00:12:12
follows the tradition that you should
00:12:14
retire at 67 or 65 or 62 that is not set
00:12:18
in stone it is very reasonable to plan a
00:12:20
retirement earlier than that 50 or 55
00:12:23
perhaps even earlier but you should
00:12:26
Google a fire calculator and and pencil
00:12:29
out what your future fire could look
00:12:31
like pick a reasonable age for you okay
00:12:35
second tip saving money is good saving
00:12:38
more money is better plan for that
00:12:40
future and think long term now whether
00:12:42
you end up retiring early or not it's
00:12:45
good advice to save money and the more
00:12:47
the better absolutely the third
00:12:50
applicable idea if you're sick of the
00:12:52
grind at work say the solution might be
00:12:56
you need to retire early but the
00:12:58
solution might might be something
00:12:59
different instead the solution might be
00:13:01
find something you enjoy doing life is
00:13:04
long there's plenty of work left to be
00:13:06
done and and the solution to not
00:13:08
enjoying work doesn't necessarily mean
00:13:11
that you have to retire it could just
00:13:13
mean you need to redefine what work
00:13:14
means for you I can speak to that with
00:13:17
firsthand experience wholeheartedly
00:13:19
right my previous job as an engineer my
00:13:21
previous career was fine but it did not
00:13:24
light a fire underneath me and after
00:13:27
seven years of of grinding as an
00:13:28
engineer year I did get more and more
00:13:31
sick of it for lack of a better term and
00:13:33
I was looking for something different at
00:13:35
one point I thought that something
00:13:36
different meant retiring early pursuing
00:13:38
fire but once I Chang careers I now love
00:13:42
what I'm doing every day right I I work
00:13:44
professionally in wealth management I'm
00:13:45
helping people professionally in a
00:13:47
similar way that I'm helping people on
00:13:48
the best interest and the best interest
00:13:50
podcast and now I don't really want to
00:13:53
retire early I'm still on the the path
00:13:55
to financial Independence right I'm
00:13:56
still saving money I'm I'm still in
00:13:58
investing wisely in in a diversified
00:14:00
portfolio I'm I'm pursuing I'm I'm
00:14:03
acting on I should say a lot of the
00:14:04
tenants of financial Independence but
00:14:06
I'm not necessarily worried about the re
00:14:08
part of it I'm not thinking about
00:14:10
retiring early I redefined what work
00:14:12
meant to me and and that really helped
00:14:14
me prioritize my goals and and separate
00:14:17
the FI from the
00:14:19
re my fourth point or my fourth action
00:14:22
is that people who are pursuing fire
00:14:25
they generally have a set of behaviors
00:14:27
that's very much in line with the way I
00:14:29
think here on the best interest and so
00:14:31
while I'm not always 100% on board with
00:14:34
all of the fire ideas I do not want to
00:14:36
throw the baby out with a bath water or
00:14:38
exhibit the the narcissism of small
00:14:40
differences so if you read fire blogs or
00:14:43
subscribe to fire forums or listen to
00:14:45
fire podcasts I'm fully on board and I
00:14:48
think you're going to learn something
00:14:49
extremely
00:14:51
worthwhile all right next I'm going to
00:14:53
be reading and and riffing off of an
00:14:55
article that I wrote on the best
00:14:56
interest and it was one of the probably
00:14:59
bigger articles in terms of like the
00:15:00
readership and and the way it went viral
00:15:02
one of the bigger articles I wrote in
00:15:04
2022 the link is in the show notes the
00:15:07
article is called you're probably using
00:15:09
the 4% rule all wrong so this article
00:15:13
was uh influenced by a great reader
00:15:15
question a retirement question from
00:15:17
Michael who asked and I quote so I often
00:15:21
hear people say if you follow the 4%
00:15:23
rule you'll never run out of money but I
00:15:25
thought it was just a high probability
00:15:27
of not running out of money for maybe 25
00:15:29
to 35 years can you really never run out
00:15:32
of money with the 4% rule end quote
00:15:35
Michael's question is so good because
00:15:37
the 4% rule is one of if not the most
00:15:40
frequently misunderstood retirement
00:15:41
topics in general but especially when it
00:15:44
comes to personal finance forums social
00:15:46
media because that's where a lot of
00:15:48
financial Independence content lives the
00:15:50
4% rule being this this foundational
00:15:53
rule of financial Independence is
00:15:55
frequently misunderstood so let's break
00:15:57
down and explain the 4% rule in simple
00:16:00
terms the 4% rule was created because
00:16:03
retirees have always faced this really
00:16:05
scary question how much money can I
00:16:07
withdraw from my portfolio without ever
00:16:10
running out that amount of money is
00:16:12
called a safe withdrawal rate or S SWR
00:16:15
without a known s SWR it's really tough
00:16:18
for someone to determine how much money
00:16:20
they need in retirement how much they're
00:16:22
total Nest Egg needs to be cuz how can a
00:16:25
person feel comfortable that they won't
00:16:27
run out of money that is stressful
00:16:29
question so let's talk about the basics
00:16:31
of the 4% rule the 4% rule suggests that
00:16:35
retirees can withdraw about 4% of their
00:16:38
retirement Nest EG every year in
00:16:39
retirement and never run out of money
00:16:43
with some important caveats which we all
00:16:44
discuss so let's say I'm planning my
00:16:46
retirement after calculating my social
00:16:48
security benefits my small pension and
00:16:50
the thousands of uh pennies generated by
00:16:52
the best interest I realize that I need
00:16:54
an additional $2,500 per month to cover
00:16:57
my cost of living that's $2,500 per
00:17:00
month or $30,000 per year that's all
00:17:03
going to have to come from my retirement
00:17:05
savings how big does my portfolio need
00:17:07
to be to fund $330,000 per year let's
00:17:10
just use the 4% rule I should save 25x
00:17:14
25 times right because that's 100%
00:17:17
divided by 4% I need to save 25 times my
00:17:21
$30,000 need and and I do that by saving
00:17:25
25 time 30,000 that's
00:17:27
$750,000 if I save
00:17:29
$750,000 I can withdraw 4% of that which
00:17:32
is $30,000 a year to help fund my first
00:17:36
year of retirement that's the 4% rule
00:17:39
but now let's discuss some of those
00:17:42
vital
00:17:43
caveats the first one the 4% rule
00:17:45
assumed a 30-year retirement the 4% rule
00:17:49
has been back tested many many times it
00:17:51
was proven to work over a wide range of
00:17:53
historical Financial scenarios using
00:17:55
real historical stock and bond data the
00:17:58
4% rule had a 100% success rate for
00:18:01
30-year retirements a 91% success rate
00:18:04
for 35e retirements and an 89% success
00:18:07
rate for 40-year retirements withdrawing
00:18:11
4% for 30 years be honest with you even
00:18:14
up to 40 years that's pretty safe right
00:18:16
an 89% success rate for 40-year
00:18:19
retirements now some of you might kind
00:18:22
of be scrunching your forehead a little
00:18:24
bit because 4% time 30 years well that's
00:18:27
120% 4% time 40 years that's 160% how
00:18:31
can anyone withdraw more than 100% of
00:18:33
their portfolio of course the answer is
00:18:36
because your portfolio is invested
00:18:38
you're owning stocks and bonds and
00:18:40
potentially some other investments in
00:18:41
your portfolio and they are growing
00:18:43
year-over-year like a tree you're pring
00:18:45
away some of the branches you're
00:18:47
spending some of your money but new
00:18:49
shoots will replace them that's
00:18:51
investment growth 30 years is safe 35 or
00:18:54
40 years pretty safe but not quite as
00:18:56
safe because sometimes the new net
00:18:58
growth doesn't always keep up with the
00:19:00
pruning especially the the longer you
00:19:02
prune for if you were using the 4% rule
00:19:06
to plan a a 50-year early retirement a
00:19:09
true fire retirement where you're going
00:19:10
to retire at 30 years old I think you're
00:19:13
using the 4% rule incorrectly you'd need
00:19:17
to use results from a 50-year back test
00:19:19
which is going to yield something
00:19:21
different than a 4% rule it's probably
00:19:22
going to be closer to a 3%
00:19:25
rule okay a second important truth about
00:19:27
the 4% rule the 4% rule assumes a 5050
00:19:31
portfolio it was based again it was on
00:19:33
this assumption that a retiree has a
00:19:35
balanced portfolio of stocks and bonds
00:19:37
the most recent back test from a
00:19:39
gentleman named way fou and he did this
00:19:42
in 2018 he's a a well-known PhD
00:19:45
financial planner in our industry who
00:19:47
does a lot of academic research on
00:19:49
retirement planning Wade fou reran the
00:19:52
study using a portfolio of 50% S&P 500
00:19:56
stocks and 50 % intermediate term
00:20:00
treasury notes representing bonds if
00:20:02
you're using the 4% rule on a 100% stock
00:20:05
portfolio or a 100% Bond portfolio you
00:20:08
are using the 4% rule incorrectly
00:20:11
because each portfolio whether all
00:20:13
stocks all bonds or a mix and each
00:20:15
duration maybe a 30-year or a 20-year or
00:20:17
a 40-year retirement has its own safe
00:20:21
withdrawal rate that you can use as a
00:20:22
benchmark but that safe withdrawal rate
00:20:24
might not be 4% when you I hope if you
00:20:28
do go to this article I wrote on the
00:20:30
best interest with the link in the show
00:20:31
notes there's a very instructive chart
00:20:34
that shows how long your retirement Nest
00:20:36
Egg will last based on Wade F's study
00:20:39
and I grabbed the data that he published
00:20:41
from from a 100% stock portfolio down to
00:20:44
0% stocks from 30 years out till 60
00:20:47
years and there's a very wide range of
00:20:50
outcomes depending on how you want your
00:20:52
retirement to look as a very quick
00:20:54
example let's go to a 50/50 portfolio
00:20:57
that we know that the the 4% rule is
00:20:59
based on but instead of 30-year
00:21:00
retirement which again is where the 4%
00:21:02
rule comes from let's go to a 50-year
00:21:05
retirement this might be someone who's
00:21:06
going to fire retire early at age 30 or
00:21:09
35 and wants to plan that they'll die at
00:21:11
80 or 85 what's the success rate for
00:21:14
that kind of portfolio a 50/50 portfolio
00:21:16
for 50 years the answer is that that
00:21:19
portfolio succeeds only about 70% of the
00:21:22
time with a 4% withdrawal rate if you
00:21:25
want to increase your percent of success
00:21:27
to 90% or 95% you'll need to change your
00:21:30
withdrawal rate to between 3.25 and
00:21:34
3.5% so the more bonds you hold the less
00:21:37
you can withdraw the more stable your
00:21:40
portfolio is which is nice but the less
00:21:42
you can withdraw and similarly the
00:21:44
longer you want to be retired for the
00:21:46
less you can
00:21:48
withdraw okay the next important caveat
00:21:50
of the 4% rule is that the 4% rule is
00:21:52
inflation adjusted the 4% rules creators
00:21:55
were smart and they included inflation
00:21:57
into their back test test so let's uh
00:21:59
revisit the example from before where I
00:22:01
had to save
00:22:02
$750,000 to withdraw $30,000 of
00:22:05
retirement income in the first year of
00:22:06
my retirement now due to inflation I
00:22:09
might need to withdraw say $31,000 in
00:22:12
year two of retirement and then $32,000
00:22:15
in year three of retirement the creators
00:22:17
of the 4% rule they accounted for that
00:22:19
slow creep upwards due to inflation it's
00:22:22
already built in so the 4% calculation
00:22:25
and then the the 25x rule that used
00:22:28
before that's based on your year one
00:22:31
spending in retirement and it accounts
00:22:33
for the inflationary cost of living
00:22:35
after that okay let's talk about what
00:22:38
the 4% rule is not because by
00:22:41
understanding these common 4% rule
00:22:43
mistakes you can arm yourself against
00:22:45
some poor retirement planning
00:22:47
choices the 4% rule is not a guarantee
00:22:51
it is not guaranteed to work for you it
00:22:53
worked in the past right it worked based
00:22:55
on 20th century economic conditions it
00:22:57
it worked based on the historic back
00:22:59
tests that the creators chose which
00:23:01
included for example a lot of US stocks
00:23:04
and a lot of us bonds and the question
00:23:06
we have to ask ourselves is will the
00:23:08
future the next few decades the next 100
00:23:10
years will they mirror the previous 100
00:23:12
years I don't know maybe we'll have a
00:23:15
Utopia or maybe we'll have a climate
00:23:17
crisis or aliens or a meteor that will
00:23:20
damage the planet in some pretty bad
00:23:22
ways and and make the 4% rule not work
00:23:24
as well as we hoped it would now that of
00:23:26
course is the hard part about Being
00:23:28
Human we too easily fool ourselves into
00:23:30
exuberant optimism or forlorn depression
00:23:34
if we cathywood ourselves into a 20%
00:23:36
annual return for the next 50 years we
00:23:38
could adopt a 10% rule and retire
00:23:41
tomorrow but if we follow people like
00:23:43
Jeremy Grantham who's a famous stock
00:23:44
market Bearer we might believe that the
00:23:47
the greatest depression starts tomorrow
00:23:49
and even a 1% rule would fail that kind
00:23:52
of economic cataclysm would turn
00:23:54
Hometown USA into Mad Max I try to stay
00:23:57
IM between those extremes and that's why
00:23:59
I use the 4% rule as a starting point
00:24:01
it's a guidepost it's about as good an
00:24:03
answer as we have in the Trinity study
00:24:06
which produced the 4% Rule and produced
00:24:07
some other findings is about a good as
00:24:09
answer as we have but it's not a
00:24:12
guarantee but it is it's actually
00:24:14
interesting if we look at something that
00:24:16
bill benan bill benan is the the Creator
00:24:19
the OG of the 4% rule if we look at
00:24:21
something that he recently told the Wall
00:24:23
Street Journal he mainly holds cash not
00:24:26
stocks or bonds due to his anxiety over
00:24:29
High market valuations now bill was
00:24:32
saying this last March and April so he's
00:24:34
looking pretty pretty smart right now
00:24:35
actually maybe he was on to something
00:24:38
but it's interesting that even the
00:24:39
creator of the 4% rule because of his
00:24:41
own behavioral biases because of his own
00:24:44
anxiety chooses to not hold as much
00:24:47
bonds or as much
00:24:49
stock as the study itself would
00:24:52
recommend and then there's there's other
00:24:54
criticism of the 4% rule over the worry
00:24:56
that it's not quite guaranted in late
00:24:58
2021 Morning Star very famous financial
00:25:01
news Outlet Morning Star issued a report
00:25:03
suggesting that a more conservative 3.3
00:25:06
to 3.5% rule was the intelligent Choice
00:25:09
moving forward and that of course would
00:25:11
mean that retirees would need to save
00:25:12
more the difference between a 3.3 Rule
00:25:15
and a 4.0 rule is you have to save an
00:25:17
extra you know 15 to
00:25:19
20% and then another source financial
00:25:22
planning All-Star Michael kites he
00:25:25
published a response to that Morning
00:25:26
Star article in in the response I should
00:25:29
say kit explained why he thought the 4%
00:25:31
rule was still very valid now the reason
00:25:34
why I'm telling you about Benin and
00:25:36
Morning Star and kites is because even
00:25:37
the best experts in the world can't
00:25:40
agree on the 4% rules utility it's just
00:25:43
a guidepost it's not a guarantee what
00:25:46
else the 4% rule is not aggressive nor
00:25:49
is it conservative you know saying
00:25:51
something like you probably shouldn't
00:25:53
eat too much candy is that an aggressive
00:25:56
admonishment or is that a cons
00:25:57
conservative suggestion if you're a
00:25:59
9-year-old on Halloween that's
00:26:01
aggressive right don't limit me I want
00:26:03
to eat all the candy I want to eat but
00:26:05
if you're a paranoid dentist then that's
00:26:07
conservative because why leave the door
00:26:09
open to any candy consumption don't you
00:26:11
realize that one mini Snickers can cause
00:26:13
a cavity that's kind of how the 4% rule
00:26:15
works too if you run out of money in
00:26:19
retirement you would accuse the 4% rule
00:26:21
of being irresponsibly aggressive but
00:26:24
you need to remember that the 4% rule
00:26:26
was created to eliminate failure
00:26:29
therefore it can be very conservative
00:26:31
for many retirees and here's a a crazy a
00:26:35
really crazy example of that
00:26:36
conservatism the aforementioned Michael
00:26:38
kites did a back test of the 4% rule on
00:26:42
a 60% stock 40% Bond
00:26:45
portfolio of course the reason why kites
00:26:47
chose 6040 is because that's a very
00:26:50
common and kind of traditional
00:26:51
retirement portfolio and kit found that
00:26:54
retirees using the 4% rule were just as
00:26:57
as likely to quadruple their money as
00:27:00
they were to decrease their portfolio by
00:27:03
a single
00:27:04
scent think about that again if you
00:27:06
retired with a million dollars over some
00:27:09
time in the last century and you used
00:27:11
the 4% rule you were more likely to die
00:27:15
with $5
00:27:16
million than you were to die with less
00:27:19
than a million dollar and the reason why
00:27:22
is because an Investment Portfolio
00:27:24
typically compounds well beyond 4% per
00:27:27
year
00:27:28
the 4% rule it survives the worst
00:27:30
markets right that's why it was created
00:27:32
to survive the worst markets but then in
00:27:34
average markets the 4% rule absolutely
00:27:37
thrives so it's an important thing to
00:27:39
keep in mind and it's a reason why the
00:27:41
4% rule comes under some criticism is
00:27:43
because in the average market conditions
00:27:46
over the past Century the 4% rule has
00:27:48
been way too
00:27:50
conservative the next important thing to
00:27:52
keep in mind the 4% rule does not
00:27:54
absolve you of taxes you need to
00:27:56
consider your own tax situation ation
00:27:57
when applying the 4% rule to your life
00:28:00
far too many people misapply the 4% rule
00:28:02
by not considering their taxes for
00:28:04
example rent groceries gas let's say I
00:28:07
spend $4,000 per month or $48,000 per
00:28:10
year If I multiply by 25 that's $1.2
00:28:13
million therefore I'll need about $1.2
00:28:16
million in my 401k to safely utilize the
00:28:19
4% rule well the problem of course is
00:28:22
how that $1.2 million could be taxed
00:28:25
dollars invested in traditional
00:28:27
retirement accounts like many 401ks will
00:28:29
face a future income tax dollars
00:28:32
invested in a taxable brokerage might
00:28:34
face a future capital gains tax so the
00:28:36
$1.2 million Nest Egg could easily end
00:28:39
up being closer to 1.0 million after
00:28:41
taxes are paid and now this person who
00:28:44
needs $48,000 a year they're withdrawing
00:28:47
4.8% on a million instead of 4% on 1.2
00:28:51
million now that's not ideal so you need
00:28:54
to account for taxes as best you can so
00:28:57
that your total annual withdrawal
00:28:59
including the tax bill is 4% of your
00:29:02
year one Nest EG it's easier said than
00:29:04
done and it's one reason why uh a
00:29:06
financial planning help is really your
00:29:08
friend when it comes to retirement
00:29:10
income retirement tax planning cash flow
00:29:12
planning that kind of thing one one more
00:29:15
interesting note about what the 4% rule
00:29:17
is or is not is a fun one on how wrong
00:29:21
Dave Ramsey has the potential of being
00:29:23
so I've said this before on the best
00:29:26
interest the blog on the podcast have
00:29:29
even been quoted in some bigger
00:29:30
Financial Outlets with with this idea
00:29:33
that Dave Ramsey is great at getting
00:29:34
people from negative net worth to zero
00:29:37
right he's great at getting people out
00:29:38
of debt but he's demonstrably bad at
00:29:41
getting people from zero net worth to
00:29:43
retirement now one way is that Dave has
00:29:46
recommended before that people use an 8%
00:29:49
rule or an 8% withdrawal rate on a 100%
00:29:52
stock
00:29:54
portfolio now we canest that out we can
00:29:57
see the efficacy of Dave's advice right
00:29:59
there in fact we we have some great data
00:30:01
from the aforementioned Wade foul from
00:30:03
his version of the Trinity study that
00:30:06
shows us for a 20-year retirement Dave
00:30:09
Ramsey's plan fails in 38% of back tests
00:30:13
for a 25-year retirement it fails 46% of
00:30:16
the time for a 30-year retirement it
00:30:19
fails 57% of the time and for a 35-year
00:30:22
retirement it fails 64% of the time Dave
00:30:26
Ramsey's plan the 8% rule on a 100%
00:30:29
stock portfolio fails a lot now for
00:30:33
younger investors with a long timeline
00:30:35
in front of them a 100% stock portfolio
00:30:38
might make sense if they are planning on
00:30:40
20 or 30 or 40 Years of wealth
00:30:42
accumulation but 100% stocks is far too
00:30:45
aggressive for someone with a long
00:30:47
period of withdrawal in front of them
00:30:49
right and that's what retirement is it's
00:30:51
a it's a process of withdrawal so big
00:30:53
thanks to Michael whose great question
00:30:55
prompted this little blurb on what the
00:30:56
4% % rule is and is not 4% rule is not a
00:31:00
guarantee it has important caveats that
00:31:02
are too often overlooked yet it remains
00:31:05
a data-backed guide poost to help
00:31:07
retirees and future retirees find
00:31:09
comfort in their long-term financial
00:31:14
[Music]
00:31:26
planning last but not least we're going
00:31:28
to talk a little bit about the Cool Math
00:31:30
behind the savings rate and how even
00:31:32
small changes in in your savings rate
00:31:35
can allow you to retire years and years
00:31:37
early so we're going to cover a basic
00:31:39
concept that's going to allow you to
00:31:41
retire potentially decades early imagine
00:31:43
a married couple with the following
00:31:45
statistics they earn $100,000 per year
00:31:48
in $
00:31:49
2023 every dollar they earn of course is
00:31:51
either spent or saved the saved dollars
00:31:54
are invested and they end up growing at
00:31:56
about 7% per year over many many decades
00:31:59
and rather than use the famous 4% rule
00:32:02
that we've been talking about today they
00:32:03
decide to use a more conservative 3.3%
00:32:06
rule that means our couple needs to save
00:32:08
30X their annual spending to comfortably
00:32:11
retire we'll come back to this idea in a
00:32:14
little bit as well by the time they
00:32:16
retire they'll be receiving $2,400 per
00:32:18
month in Social Security and that's
00:32:20
measured in today's dollars so that's a
00:32:22
big boost to their retirement income
00:32:24
needs so the questions of course for
00:32:26
their retirement plan is what do they
00:32:27
spend and what do they save that gives
00:32:29
us the savings rate that's what we're
00:32:31
going to look at right now and we're
00:32:33
going to see the importance of their
00:32:35
spending to saving ratio of that savings
00:32:38
rate the importance of that cannot be
00:32:40
overemphasized so first let's imagine
00:32:43
this couple again they they earn
00:32:45
$100,000 a year let's imagine that they
00:32:47
spend $95,000 and they save 5,000 per
00:32:50
year that includes everything taxes
00:32:52
groceries the mortgage all of it at that
00:32:54
savings rate starting at zero the couple
00:32:57
will need 50 years to build up their
00:32:59
retirement Nest Egg now I'm going to
00:33:02
quickly argue with myself because by the
00:33:03
time 50 years elapses the couple is
00:33:05
actually going to be pretty close to
00:33:07
death and if you're going to retire at
00:33:09
age 80 you don't need 30 years of of
00:33:12
spending in your nest egg so if they
00:33:14
were this couple by the time they hit
00:33:15
year 40 they'll have about 15 years of
00:33:18
spending saved up by the time they hit
00:33:20
year 44 they'll have about 20 years of
00:33:22
spending saved up and that might be a
00:33:24
more realistic retirement date for them
00:33:27
but still we're talking about 40 to 50
00:33:29
years before retirement is realistic for
00:33:31
them but now let's tweak their spending
00:33:34
habits a little bit rather than spend
00:33:36
95% of the income and save 5% let's dial
00:33:39
it back to spending 90% and saving 10%
00:33:44
so now they're going to instead of
00:33:46
spending $7,900 per month they're only
00:33:49
going to spend $7,500 per month and that
00:33:51
$400 difference they're going to start
00:33:53
investing that that simple tweak shaves
00:33:56
82 11 years off of their expected
00:33:59
retirement date they'll meet their
00:34:01
future full retirement number in year 39
00:34:04
and again depending on how old that
00:34:06
makes them they might hit a more
00:34:07
realistic retirement number around year
00:34:10
35 but we can keep going we can dial
00:34:13
back the spending from 90% down to 85 80
00:34:16
75% and each 5% increment for this
00:34:19
couple represents $400 of additional
00:34:22
savings per month the reason why I I
00:34:25
emphasize that is because this has to
00:34:27
come from somewhere you know they they
00:34:28
can't just save money without spending
00:34:30
less they have to make some active
00:34:32
decisions in their life to spend less
00:34:34
money that allows them to save more and
00:34:36
allows them to save time off of their
00:34:38
retirement so if they spend 85% and save
00:34:42
15% they'll hit full retirement in year
00:34:45
32 at
00:34:47
8020 year 27 at
00:34:50
7525 year 23 at 7030 year 20 so our
00:34:56
first hypothetical couple spent 95% of
00:34:59
their income or 7,900 per month and hit
00:35:02
full retirement in 50 years the final
00:35:05
couple spends 70% of their income or
00:35:08
$5,800 per month and they hit full
00:35:10
retirement in 20 years now granted this
00:35:14
20 years of retirement savings that
00:35:16
might not actually be enough time to get
00:35:17
them to Social Security age but they
00:35:20
really could retire decades earlier
00:35:22
technically speaking about three decades
00:35:24
before our first couple so that's a 25%
00:35:28
difference in spending and that leads to
00:35:30
a 250% difference in terms of retirement
00:35:33
dates that's 30 years of difference it's
00:35:36
not magic nor does it involve top secret
00:35:38
investing knowledge instead that
00:35:40
underlying mathematical reason is just
00:35:42
compound interest a small savings
00:35:44
difference early in life compounds into
00:35:47
a huge retirement difference later on
00:35:50
compound interest is something that
00:35:51
everyone can hardest absolutely everyone
00:35:54
and every small percentage Point counts
00:35:56
if you don't save much like our 95%
00:35:59
Spenders then every percent you save
00:36:02
will buy you an extra two years of
00:36:04
earlier retirement and even if you're
00:36:07
already a Big saver like our 7030 people
00:36:10
who spent 70% and saved 30% even if you
00:36:13
are a mega saer like then for them an
00:36:16
additional 2% of savings buys them
00:36:19
another one year of early retirement
00:36:21
it's still impactful I know saving isn't
00:36:24
easy we all have bills to pay miles to
00:36:26
feed
00:36:27
and there ain't nothing in this world
00:36:28
for free as they say saving is hard but
00:36:31
it is possible and now what's not
00:36:33
possible in this life is getting back
00:36:35
those Decades of time where you're
00:36:37
working instead of enjoying this life so
00:36:41
personally I I enjoy working we kind of
00:36:43
already talked about that a few minutes
00:36:44
ago I don't see retirement as this
00:36:45
magical Panacea I'm not racing to retire
00:36:48
decades early but I don't want to work
00:36:50
till I'm 75 either I want to have that
00:36:53
choice and a small change today might
00:36:55
buy us a world world of flexibility
00:36:57
later on and that's a trade in our best
00:37:00
interest with that let's bring on Brad
00:37:03
parrot here onto the podcast Brad is the
00:37:05
host of choose fi and we're going to
00:37:07
pick Brad's expert brain about some fire
00:37:14
[Music]
00:37:24
topics hey Brad thanks so much for
00:37:27
coming on the best interest podcast Jess
00:37:28
I am excited to be here this should be
00:37:30
fun well Brad I hope I've done a good
00:37:32
job describing to my audience they're
00:37:33
probably already familiar with you but
00:37:35
you are a financial Independence expert
00:37:37
I hope it's okay for me to say that and
00:37:41
one of my personal favorite discussions
00:37:43
and I think it Blends in really well
00:37:45
with the kind of the fire mindset is
00:37:47
that money should be thought of as a
00:37:49
means not as an end right a means to an
00:37:52
end sure but sometimes in the fire
00:37:54
movement and and I got caught up this
00:37:56
myself when I was really thinking hard
00:37:58
about financial Independence is that my
00:38:00
fi number that that Financial goal
00:38:03
became too much of a of an end in my
00:38:06
mind so I'm just wondering how you think
00:38:09
about that and how do you personally
00:38:11
ensure that money is is a means but not
00:38:13
an end yeah I think this is a really
00:38:17
critical thing
00:38:18
because a lot of us in the FI movement
00:38:21
are or have been maybe recovering tiay
00:38:25
right where it's all about succeeding
00:38:29
and doing the right thing and checking
00:38:31
those boxes and while I think there is
00:38:34
some level of of counterculture right by
00:38:37
pursuing fi I think it is easy to get
00:38:39
swept up in the horrible keeping up with
00:38:42
the Joneses just in a very different way
00:38:45
right we're not keeping up with the
00:38:47
Joneses with the mcmansions and the BMWs
00:38:49
we're keeping up with the Joneses in oh
00:38:52
is your savings rate 57% Well mine's 59
00:38:55
and a half right like look at how great
00:38:57
I am or oh I'm going to cut that last
00:39:01
little thing and and get there I mean
00:39:04
obviously you can tell I'm I'm rambling
00:39:06
because it's it's it's all nonsense it's
00:39:08
just it's a race to Nowhere it's an
00:39:11
absolute race to nowhere and I think I
00:39:14
think what a lot of us have realized is
00:39:16
the number the FI number even when you
00:39:19
get to fi which I think by any
00:39:22
definition your life is dramatically
00:39:25
better and and I'm not trying to argue
00:39:27
otherwise your life is so much better
00:39:29
pursuing fi than otherwise the level of
00:39:33
stress mitigation the level of control
00:39:36
that you have over your life it's Lighty
00:39:38
years different than people who are just
00:39:41
living to paycheck to paycheck so it is
00:39:43
unquestionably a positive but to your
00:39:48
question you can get caught up in oh I'm
00:39:50
going to reach this magical shanga of my
00:39:53
fi number and it's all going to be
00:39:56
unicorns and rainbows and I'm going to
00:39:58
ride off into the sunset and my life is
00:40:00
going to be
00:40:00
perfect well I'm kind of here to tell
00:40:03
you that that is not the case that is
00:40:05
the furthest thing from the truth and
00:40:08
again it makes it easier there's no
00:40:09
there's no denying that but you need to
00:40:12
do the work you need to do the work on
00:40:15
what do you want your life to look like
00:40:18
and I think this is is the heart of your
00:40:21
question right is like what are we doing
00:40:23
here what lights you up who do you want
00:40:25
to spend time what does your day look
00:40:27
like I mean you have what somewhere in
00:40:29
the vicinity of 112 waking hours a week
00:40:33
if you if you sleep 8 hours a night and
00:40:36
man you got to figure out what that
00:40:38
looks like because those 112 hours
00:40:40
aren't going to be filled up by looking
00:40:42
at a spreadsheet and like grinning to
00:40:44
yourself right like that's not life
00:40:47
totally totally you just struck on
00:40:49
something there Brad I I realized in my
00:40:51
own kind of fire Pursuit that I was
00:40:55
running away from something being my old
00:40:57
career just as much as I was running
00:41:00
toward fi or or retiring early and
00:41:03
running away from something is is not a
00:41:05
great reason to to alter your life or to
00:41:08
change your life and once I started my
00:41:10
new job which I like a lot more I'm
00:41:12
still pursuing fi for sure like you
00:41:15
alluded to it it just asales such great
00:41:17
personal finance principles but the
00:41:19
concept of REI really hasn't crossed my
00:41:21
mind in the last like 18 months I I like
00:41:24
what I'm doing every day and so because
00:41:27
I've turned my life into a new Direction
00:41:29
where I'm enjoying this path that I'm on
00:41:32
the FI part still is huge but the re not
00:41:34
not as much I think I think you've hit
00:41:36
it and I think so many of us have looked
00:41:39
at this cute acronym right the fire and
00:41:42
and there is some Allure to the actual
00:41:44
name and I think that's why it sticks
00:41:46
but I mean we are choose Fi not choose
00:41:49
fire and we very rarely talk about fire
00:41:53
because frankly the re is just a
00:41:56
distraction it's people get caught up in
00:41:58
the caricature of these 20s something
00:42:01
kids sitting on a beach sipping umbrella
00:42:04
drinks right like that and and it's so
00:42:06
far from the truth it's man when you
00:42:09
have this space financially when you
00:42:11
have this power and autonomy you can add
00:42:14
value to your life and the world and
00:42:16
your community in ways that you
00:42:18
otherwise wouldn't and like you're
00:42:19
saying Jesse that might mean a job that
00:42:24
might mean paid employment for the next
00:42:26
50 years and that's wonderful do what
00:42:28
you want but do it from a place of power
00:42:31
do it from a place of choice as opposed
00:42:34
to I need this job or my life is going
00:42:37
to come crumbling down in the next 90
00:42:40
days because that's everybody else my
00:42:43
life is going to come crumbling down in
00:42:45
the next 90 days if I don't have this
00:42:47
job 52 weeks a year and that's not good
00:42:50
enough right it's a little scary it's a
00:42:52
little stressful too my my biggest thing
00:42:55
is I I call it the success to stress
00:42:57
ratio I shouldn't say it's my biggest
00:42:58
thing it's it's one of my like pillars
00:43:00
of how I approach these problems is if I
00:43:02
think about a fraction I mean I'm a math
00:43:04
guy I know you're a math guy and I've
00:43:06
got success in the numerator and I have
00:43:08
stress in the denominator I want to
00:43:10
increase my success of course but I also
00:43:13
want to reduce my stress increasing
00:43:15
success while also increasing stress
00:43:17
doesn't really improve my ratio at all I
00:43:19
love and so right I mean living that
00:43:21
lifestyle of on that 60 or 90day
00:43:24
timeline before your world comes
00:43:25
crumbling down is a stressful place to
00:43:27
be it sure is I love that ratio by the
00:43:29
way and that reminds me of something the
00:43:31
writer Nick muli talked about I think
00:43:33
it's the return on hassle if you have
00:43:36
that as a mindset this stress Ratio or
00:43:40
potentially hey is the juice worth the
00:43:43
squeeze is another way of putting this
00:43:45
return on hassle is this worth my time
00:43:48
is this worth the effort is the marginal
00:43:50
benefit that I'm getting from this worth
00:43:53
whatever it may be in terms of time
00:43:55
energy resource stress whatever you want
00:43:57
to talk about you need to really think
00:43:59
about that because it's not just about
00:44:02
maximization in every aspect I I don't
00:44:04
think success in life is about
00:44:06
maximization I think it's about living a
00:44:08
good life and trying to find some level
00:44:10
of balance and I think you know balance
00:44:13
can sound trit but but I don't think
00:44:15
it's trite at all I think it's that is
00:44:17
the key and it's hard it's hard to come
00:44:19
by frankly and we we were talking about
00:44:21
this before hitting record it's it's
00:44:23
easy to say yes to things when things
00:44:24
sound fantastic
00:44:26
it's easy to put things on the calendar
00:44:29
six months out when If This Were
00:44:32
tomorrow would I put it on the calendar
00:44:34
well maybe maybe not
00:44:37
right I like that her istic though maybe
00:44:39
I need to start thinking about that you
00:44:41
know as far as putting stuff on the
00:44:42
calendar would I do it if it was
00:44:43
tomorrow because that that's that's a
00:44:45
different answer it's almost like the I
00:44:47
don't want to say it's exactly the same
00:44:48
as Danny conman's kind of type one type
00:44:50
two thinking but it's kind of related to
00:44:52
that I think what Danny Conan does talk
00:44:54
about is current me versus future me
00:44:57
that very easy to make plans for future
00:44:59
me but it's much harder to make plans
00:45:01
for current me hence why we do things
00:45:03
like say yeah I'm going to run a half
00:45:04
marathon this summer but you wouldn't
00:45:05
run a half marathon tomorrow you know
00:45:07
something like that Brad I think I'm
00:45:10
hoping we can dig in a little bit into
00:45:11
you as a as a specific example because
00:45:13
you reached fi at age 35 and some of our
00:45:17
listeners are going to be sitting here
00:45:18
thinking like wow that's amazing how is
00:45:20
that possible what happened and and I
00:45:22
know you've told the story on on the
00:45:24
choose fi podcast a number of different
00:45:25
times in a number of different episodes
00:45:27
but would you mind just giving us a few
00:45:28
of the details maybe how you went on
00:45:31
your road from a starting point of I
00:45:34
have no idea what fi is to this not an
00:45:38
end point but a really cool mile post
00:45:40
where you said I'm 35 and I've now
00:45:43
reached fi yeah it's funny it sounds
00:45:46
remarkable when you say it out loud but
00:45:48
in our lived experience for my wife and
00:45:51
I it was just it was just our life and
00:45:54
that that's the funny thing like and I
00:45:56
will I will try to answer every every
00:45:58
aspect of your question but it it never
00:46:02
felt like and I think this is the real
00:46:03
important Colonel is it never felt like
00:46:06
we were doing something bizarre or
00:46:10
different or that there was any level of
00:46:13
deprivation that we were living some
00:46:15
monastic life that like we weren't part
00:46:18
of society or all those things like it
00:46:21
was never like that like we have always
00:46:23
felt that we've lived the same
00:46:26
middleclass lifestyle as everybody else
00:46:27
around us that just by making a couple
00:46:31
of smart choices and I know that's part
00:46:32
of your question that we've been able to
00:46:35
instead of living paycheck to paycheck
00:46:37
we've been able to save somewhere in the
00:46:39
vicinity of 50% of our income
00:46:41
essentially every year that we've been
00:46:43
adults and obviously that has that has
00:46:46
plus or minus there were years where it
00:46:48
was significantly higher than that and
00:46:50
there was certainly when my wife stopped
00:46:52
working there were years where it was
00:46:53
lower than that but I think that 50% has
00:46:56
been roughly accurate and yeah I I think
00:46:59
kind of going back to the beginning
00:47:00
because it actually does tie into like
00:47:02
our mindset finding fi and then making
00:47:05
big decisions so we lived on Long Island
00:47:10
New York so high cost of living area
00:47:13
suburb of of New York City but but an
00:47:15
hour outside but still very high cost of
00:47:17
living area and my wife and I were both
00:47:20
CPAs I met her when I was 22 she was 23
00:47:24
and worked at the biggest accounting
00:47:26
firm in the world and we were by all
00:47:30
definition of okay where were we at that
00:47:33
point we were successful right like we
00:47:35
both did really really well in school we
00:47:37
got jobs at this this amazing firm and
00:47:41
the carrot is always there of hey if you
00:47:44
work really hard you could be a partner
00:47:46
someday right and you could make 500,000
00:47:49
a year a million or more a year whatever
00:47:51
it may be and I mean I think we both
00:47:53
could have done that but
00:47:56
we we kind of looked around and said
00:47:59
there were some of these little
00:48:00
formative moments and and it's probably
00:48:01
almost two Nuance to go into but like
00:48:03
thinking of that carrot and seeing I
00:48:06
know like my the partner in our tax
00:48:09
department there at 2 am with us on
00:48:12
April 14th literally copying and
00:48:15
stapling tax returns this is in the old
00:48:17
days right and like if that's the carrot
00:48:20
like what are we talking about here like
00:48:22
this doesn't right is that the future
00:48:25
that you're that you're working so hard
00:48:26
for is that the future that you wanted
00:48:28
it made it made no sense so I think the
00:48:31
backdrop is Laura and I were and both
00:48:34
are natural Savers so we both very
00:48:37
smartly lived at home with our parents
00:48:40
for the first couple years saved a
00:48:42
boatload of money I mean saved every
00:48:44
dollar that wasn't going to to the
00:48:46
little bit of student loans that we had
00:48:49
and we were able to save a nice nest egg
00:48:51
and when we got married in 2005 we kind
00:48:55
of looked around and said all right look
00:48:57
we can make a life here on Long Island
00:49:00
we can this is where our family and
00:49:01
friends
00:49:02
are but is that the best decision for
00:49:06
our future is that the best decision for
00:49:08
our lives for these future kids that
00:49:10
we're going to have someday or if we
00:49:12
lived here are we always going to have
00:49:14
to give something up are we always going
00:49:16
to have to give up one of us staying
00:49:18
home with the kids or saving for
00:49:20
retirement or saving for travel or
00:49:22
saving for college or whatever it may be
00:49:24
right like it didn't add up so we made
00:49:27
the very tough decision to leave Long
00:49:29
Island and move down to Richmond
00:49:32
Virginia and the cost of living here is
00:49:35
a fraction of what it was back home it's
00:49:37
you know probably well now it's probably
00:49:39
a half or more but it was it was like a
00:49:41
third
00:49:42
then and that one decision that was a
00:49:45
massive massive difference like I still
00:49:47
remember we bought a four bedroom house
00:49:50
in the nicest part of the Richmond Metro
00:49:52
area and our mortgage back then was1 65
00:49:56
a month which is super cheap and that
00:49:59
was a four-bedroom house where we lived
00:50:01
for almost 15 years and our girls really
00:50:05
grew up there and it was wonderful and
00:50:08
it was a th it was $1,200 a month it was
00:50:11
crazy so at that point Brad well first
00:50:14
I'm just curious like roughly what what
00:50:15
age maybe I missed that how old were you
00:50:17
when you moved to Virginia it was 2006
00:50:20
so I was I guess
00:50:22
27 M to
00:50:24
20 okay and then between when you
00:50:27
started and when you were when you had
00:50:28
met your wife your accountants on Long
00:50:30
Island and then you moved to Virginia
00:50:31
roughly 5 years later at that point were
00:50:33
you aware of this fi movement or were
00:50:36
you aware of like the the FI math and
00:50:37
the savings rates and all that fun stuff
00:50:39
so okay right trying to place the timing
00:50:43
I was not aware of the financial
00:50:45
Independence world I think until Mr
00:50:47
Money Mustache so it was probably
00:50:51
somewhere in the early 2010s I'm not
00:50:54
sure I can't believe you within 6 or 12
00:50:56
months but it somewhere in that vicinity
00:50:59
um I actually had started a a little
00:51:02
personal finance website once we moved
00:51:03
down here called Richmond Savers and I
00:51:06
got to know Brandon the mad fientist and
00:51:09
Carl from 1500 days became friends of
00:51:11
mine and then yeah I slowly started
00:51:14
meeting some of these people who were my
00:51:16
like kind of Heroes in this world of
00:51:17
like JD Roth from G slowly and mrone you
00:51:20
know P from Mr Money Mustache so yeah I
00:51:22
mean I think for me that lightning bolt
00:51:24
was F
00:51:25
Pete's shockingly simple math behind
00:51:28
early
00:51:29
retirement and that that one blog post
00:51:33
was truly a lightning bolt for me and
00:51:35
for so many other people out there when
00:51:37
when you looked at okay we're saving
00:51:39
money but to what end you asked about
00:51:42
ends before right like to what end and
00:51:46
oh a there's a whole community of people
00:51:48
in the world who are like me we're not
00:51:50
just these strange weirdos who are
00:51:52
saving money and B there's some
00:51:54
certainty to this right it's just based
00:51:57
on hey like what what does my life cost
00:51:59
every year and then I basically multiply
00:52:02
by 25 that's the number I need to reach
00:52:04
Financial Independence like we can argue
00:52:06
about the Nuance of it but man Jesse
00:52:08
right like that's the easiest thing in
00:52:09
the world to to conceptualize it's like
00:52:11
okay I control what my life costs I
00:52:13
multiply by 25 I'm a high simple end of
00:52:16
story right right you you don't know
00:52:19
this Brad but the listeners will know
00:52:20
this that during the first half of the
00:52:22
episode I dive into some of the nuance
00:52:24
and I say why 4% rule the 25x rule it's
00:52:27
a good place to start yeah and from
00:52:29
there there's some Nuance if if you
00:52:30
really want to get serious about making
00:52:31
your retirement plan you should
00:52:34
understand the nuances and and whether
00:52:35
you should tweak it but it's a great
00:52:36
place to start yeah and I and I love
00:52:38
that you touched on that because I think
00:52:40
it really highlights a little bit of
00:52:42
there's this this push and pull of
00:52:45
people like us and just the FI Community
00:52:47
generally of okay you have to get your
00:52:50
psychology right and then there's some
00:52:53
level obviously of getting the money
00:52:55
right getting the numbers like you said
00:52:56
we're both numbers people optimizing
00:52:58
like there's some push and pull here of
00:53:01
all right I think if you had big ear
00:53:04
from early retirement now on he would
00:53:06
say it is and I don't want to put words
00:53:08
in his mouth but it is like almost a
00:53:10
metaphysical certainty that like a safe
00:53:12
withdrawal rate barring a zombie
00:53:14
apocalypse of
00:53:17
3.2% is going to work in virtually every
00:53:20
case barring the zombie apocalypse again
00:53:22
I'm putting words in his mouth Carson
00:53:23
I'm not uh sorry if I got it wrong but
00:53:25
so okay well then you multiply by 30
00:53:28
approximately or there like I think I
00:53:31
think people of good faith can argue
00:53:32
about the nuance and I think it's
00:53:34
legitimate right but for most of us I
00:53:38
think the aha moment goes from the drum
00:53:42
bead of negativity from the suie orans
00:53:45
of the world of you're never going to be
00:53:47
able to retire you need 10 to million to
00:53:50
retire how could you that's
00:53:52
irresponsible to think of because what
00:53:54
about health healthare what about this
00:53:56
what about that what if Social Security
00:53:58
isn't there like okay that's fine but
00:54:03
when you switch from that drum beat of
00:54:05
negativity to wow I control this the
00:54:09
locus of control is internal there's
00:54:12
autonomy of my life cost X and okay
00:54:16
again somewhere between 25 and 33 times
00:54:19
what my annual expenses are are going to
00:54:21
get me to a point where I never need to
00:54:25
theoretically work for money again now
00:54:28
like you and like me most of us are
00:54:31
going to earn money so that that's
00:54:33
what's so great about this is like we're
00:54:35
probably being way too conservative
00:54:36
because 98% of us are going to earn
00:54:40
money so going from 25 times to 30 or 33
00:54:43
like yeah that gets you again this
00:54:44
metaphysical certainty of the safe
00:54:46
withdrawal rate but I think you're
00:54:47
probably even being too conservative
00:54:49
because again the vast majority of us
00:54:51
are going to earn money are are earning
00:54:53
money or even are you familiar BR I'm
00:54:55
I'm sure you must have seen it once or
00:54:56
twice over your your time some of the
00:54:59
data and some of the retirement analysis
00:55:00
that shows how often a 4% withdrawal
00:55:03
rate actually you end up with
00:55:05
significantly three to five times the
00:55:07
money you started with Y yeah exactly
00:55:09
you're just as likely to end up with
00:55:10
that much money as you are to spend draw
00:55:13
down a single penny from your portfolio
00:55:15
so yes we can we can hem and H about
00:55:17
right 3.24 5% I mean 4% like I said it's
00:55:21
a it's a good heuristic it's a great
00:55:23
place to start so Brad we kind of okay
00:55:25
you you've reached Virginia you're
00:55:27
you're in your your late
00:55:28
20s at what point maybe we can even fast
00:55:31
forward a couple more years you've
00:55:32
discovered Mr Money Mustache and this
00:55:34
beautiful math behind behind Financial
00:55:36
Independence when did choose fi and I
00:55:39
think of choose fi it's not only an
00:55:41
amazing project for for you personally
00:55:44
but it must have been a fantastic
00:55:45
learning experience and this kind of
00:55:47
Encyclopedia of of fi knowledge that
00:55:49
you've built up over time when did that
00:55:52
come into play into your fi Journey yeah
00:55:54
so
00:55:55
it's interesting because I think my my
00:55:57
whole fi Journey has been really
00:56:01
inextricably linked to entrepreneurship
00:56:04
which we really haven't I I guess I
00:56:06
mentioned I started that that little
00:56:08
personal finance site in in
00:56:10
2013
00:56:12
but I think of my fi life it's funny how
00:56:16
like the intersection of how you
00:56:18
conceptualize your own life versus the
00:56:20
reality which is I think of my life as a
00:56:23
traditional F story which is fairly
00:56:26
middle class income I never made more
00:56:28
than six figures in in my career and
00:56:32
just had a significant savings rate like
00:56:34
we were talking about before and and I
00:56:36
kind of shortcut it the answer because I
00:56:38
think your listeners would be curious is
00:56:40
it was a couple of big decisions so
00:56:42
clearly the living cost that was massive
00:56:45
the cars are another you look at the
00:56:47
biggest line items in your budget and
00:56:50
those are two of the three of them and
00:56:52
we drove we both bought so we had 2003 I
00:56:57
had a Civic my wife had a Highlander and
00:56:59
we drove those things until about three
00:57:01
years ago so about 17 years for each wow
00:57:05
right and like that is a massive
00:57:07
difference if you ever want to see like
00:57:10
a a crazy comparison of somebody
00:57:12
managing the payments of hey I'm going
00:57:14
to lease forever or I'm going to get a
00:57:15
new car even people think they're doing
00:57:18
well when they're getting a new car only
00:57:20
every five years or something but
00:57:21
they're continually just paying paying
00:57:23
paying I mean I've run some analysis on
00:57:26
on this and it can be a nearly million
00:57:30
dooll decision on just having and that's
00:57:33
on like a fairly old school payment like
00:57:36
I I did this based on like a $300 a
00:57:38
month payment which now is seems quaint
00:57:41
but over like a an investing lifetime
00:57:44
over a driving lifetime it can be about
00:57:46
a million dollar decision just basically
00:57:49
driving a car into the ground and then
00:57:51
even doing something quote unquote
00:57:53
suboptimal and buying a new car every 15
00:57:55
years not even doing the used car thing
00:57:57
so like I think there are ways to
00:57:58
optimize it even more but frankly that's
00:58:01
again the Nuance it you get bogged down
00:58:03
in that but I think for me the important
00:58:06
part is man if you cannot have a car
00:58:08
payment every month forever think of
00:58:11
that money that you can stockpile and
00:58:12
then if you have a significant other or
00:58:14
a spouse you're doubling that up every
00:58:17
single month and investing it and just
00:58:19
it just compounds over years and decades
00:58:21
and you don't think of your life as a
00:58:23
long time but this is 20 years that I've
00:58:25
been doing this and we've had a car
00:58:27
payment such a tiny fraction of that
00:58:31
time yeah i' seen some stat recently
00:58:33
Brad and I I couldn't find the exact
00:58:35
stat but the average car payment right
00:58:36
now in the US as of a couple months ago
00:58:39
when this article was written
00:58:41
$716 per month for a new car and and
00:58:44
when you think about maybe some families
00:58:46
have two new cars or have two car
00:58:47
payments at least so you think about it
00:58:49
$1,400 a month that's the average some
00:58:52
people are significantly higher than
00:58:54
that there's a this other stat Brad this
00:58:56
is again this is from the end of 2022
00:58:58
15% of drivers who bought a new car at
00:59:01
the end of 2022 in the last quarter of
00:59:03
2022 are paying more than $1,000 per
00:59:06
month on their car payment and that was
00:59:09
the the highest percentage of thousand
00:59:11
dollar per month ever recorded I cannot
00:59:13
I mean I can't imagine imagine a A
00:59:15
60-month or 72-month loan for a car this
00:59:18
depreciating asset at $1,000 do a month
00:59:22
it's a little bit scary and and and to
00:59:24
your point it's not that I'm against
00:59:27
people spending their money in a way
00:59:29
that they want to however the the
00:59:31
opportunity cost of this expensive truck
00:59:34
payment versus some used car that's
00:59:37
going to get you to work the same exact
00:59:38
way and then invest it over the long run
00:59:41
when you look at those dollar
00:59:42
differences which I I bet was probably
00:59:44
part your it's funny I just pulled up I
00:59:46
have a five Weekly Newsletter that I WR
00:59:48
and one that came out in February was
00:59:51
actually updating my analysis so yeah
00:59:53
the original was like a $300 a month car
00:59:55
payment and yeah the stat I saw was I
00:59:56
think 777 per month was the average so
00:59:59
you know we saw roughly the same number
01:00:01
and yeah I mean using this example that
01:00:04
I set up of this person basically doing
01:00:05
this over a 45y year driving lifetime
01:00:08
where they had three new cars where they
01:00:11
even paid 777 a month which I think
01:00:13
think is preposterous but like I wanted
01:00:15
to play along with the game and then
01:00:18
just don't have car payments for 10
01:00:20
years at the the backside so it's a
01:00:22
15-year cycle versus somebody paying
01:00:24
that 777 a month for every month of that
01:00:28
45e period the difference in net worth
01:00:31
was $2
01:00:32
million $2 million for one car now again
01:00:36
double that up if you have a spouse or
01:00:38
significant other that's a $4 million
01:00:40
difference how many people do you know
01:00:42
with a $4 million net worth period not
01:00:45
less right like not less we're just
01:00:47
talking about the Delta between the net
01:00:49
worth they would have had versus what
01:00:51
would have happened here it's I mean
01:00:53
it's crazy well it is it goes back I
01:00:56
think it's a Morgan housel quote from
01:00:57
his from his very excellent book
01:00:58
psychology of money where he says wealth
01:01:00
is what you don't see right and and the
01:01:03
choice is either you can drive that nice
01:01:06
new car and get a new car every five
01:01:08
years and and have that recurring $700
01:01:11
monthly payment every single month for
01:01:13
your entire life or you can choose to
01:01:16
drive your cars into the ground on this
01:01:18
15year rolling basis like you've
01:01:20
determined like you've analyzed but in
01:01:22
that case what you're seeing is that car
01:01:25
with Rusty hubcaps and you're seeing
01:01:27
that car that definitely looks a little
01:01:29
bit outdated what you're not seeing is
01:01:31
the fact that wealth is growing in that
01:01:33
person's investment account right wealth
01:01:35
is what you don't see that's a brilliant
01:01:36
quote Morgan is is one of the best and I
01:01:39
love that one and like you said I think
01:01:41
it's important to not judge people based
01:01:44
on their decisions and I think that's
01:01:45
that's one of my biggest takeaways kind
01:01:47
of going to to actual question about Chi
01:01:50
one of my biggest takeaways is personal
01:01:53
finance really is personal in the sense
01:01:55
that people value different things and I
01:01:58
think it's easy for me to talk about
01:02:01
cars because I don't value cars at all
01:02:03
to me it's just a means to get from one
01:02:06
point A to point B and that's it and
01:02:09
there are people who get a lot of value
01:02:11
out of their cards for whatever reason
01:02:12
that's fine that's the thing but you
01:02:14
need to make decisions right like you
01:02:16
can't if you're living paycheck to
01:02:18
paycheck now or you're going into debt
01:02:20
every month well you have to make some
01:02:23
decisions to make your life better it's
01:02:25
just plain and simple you have to cut
01:02:26
expenses or you have to earn more income
01:02:28
or some combination thereof the numbers
01:02:31
are pretty simple at the end of that
01:02:32
right like that equation we can talk
01:02:34
about being math people but like that's
01:02:35
not a hard equation that's the simplest
01:02:37
math in the world and you are going to
01:02:40
have to make some decisions but it's not
01:02:41
my place as some Dopey podcaster Brad
01:02:45
from CH ofi to talk from on high of like
01:02:48
you need to do this like I don't care
01:02:50
how you spend your money do do whatever
01:02:52
you want that's that's the thing but
01:02:54
damn you got to make decisions you
01:02:56
really do you have to take action right
01:02:58
right or or you can't you can't make
01:03:00
decisions to spend in in too many
01:03:02
different unique ways but then also have
01:03:04
the expectation that you are going to
01:03:06
retire decades early right like you got
01:03:08
to pay the piper you have to sacrifice
01:03:10
in one place to make something else work
01:03:12
and it is it's such a fun exercise and
01:03:15
I'm sure you've encountered this in some
01:03:16
way that budgeting or planning your
01:03:19
spending or thinking about what really
01:03:20
brings value to your life they're all
01:03:22
related and it's I find it pretty enjoy
01:03:25
because I get to say things like you
01:03:26
know what for me I I love I love going
01:03:29
to the gym I love working out
01:03:31
specifically I really enjoy racket
01:03:33
Sports so for me paying for that gym
01:03:36
membership at a at a kind of a nice gym
01:03:37
here in Rochester that's worth it for me
01:03:40
but I don't really like golf as much so
01:03:43
I'm not sure like it it doesn't bring me
01:03:44
joy to to belong to a golf club you know
01:03:47
it's just like what do you like and what
01:03:48
do you not like and where do you want to
01:03:50
spend and where are you going to decide
01:03:52
I'm not going to spend anything at all
01:03:53
yeah and I think part of the fun of this
01:03:56
also and how I've always conceptualized
01:03:58
fi is it's okay we're living the same
01:04:02
middle class or upper middle- class
01:04:03
Lifestyles everybody else around us just
01:04:05
we're getting wildly wealthy in the
01:04:07
process and they aren't because it's
01:04:10
it's turning life into this fun game
01:04:12
where we can succeed wildly by not
01:04:16
really doing anything that crazy like
01:04:18
you know it's it's the house the car as
01:04:20
we talked about and for a very long time
01:04:22
it was being very mindful of cooking our
01:04:25
own food and I mean literally those
01:04:28
decisions made the difference between
01:04:30
essentially having no savings rate and
01:04:31
having a 50% savings rate plus or minus
01:04:34
like that's that's the vast majority the
01:04:36
8020 of of five was just those three
01:04:39
things for us so and and yeah then you
01:04:42
get into okay this this becomes fun like
01:04:45
Pete from Mr Money mustach calls it the
01:04:47
skill of spending and I actually had him
01:04:50
on recently on the podcast and it it's
01:04:52
interesting because the skill of
01:04:53
spending becomes okay on the front side
01:04:56
the early years in fi it's how can I get
01:04:59
more out of my money how can I find
01:05:03
those I hate the phrase but but those
01:05:05
little hacks to get ahead right but but
01:05:09
when you in the beginning and you again
01:05:13
you start from a point of no savings or
01:05:16
no savings rate you need to make
01:05:18
decisions and then you get that level of
01:05:20
skill with your spending and then I
01:05:22
think frankly on the back side
01:05:24
is so many of us have become so used to
01:05:27
this this level of skill and I I don't
01:05:29
think it's deprivation I don't think
01:05:31
it's being a miser I I I don't think any
01:05:33
of those but because like you said Jesse
01:05:36
so many of us are going to end up with
01:05:38
more money than we ever know what to do
01:05:39
with because we're so conservative with
01:05:41
it because we've built all of these
01:05:43
safeguards in and 33 times and not
01:05:46
counting Social Security and not
01:05:47
counting another dollar that I'm ever
01:05:49
going to earn and not counting frankly
01:05:51
just the normal variance of even if you
01:05:55
withdraw 4% like you said you might end
01:05:58
up with three to five times the original
01:06:00
amount of money just based on there's a
01:06:02
certain percentage of likelihood of that
01:06:03
happening so I mean man we've built so
01:06:06
many safeguards in to the point of okay
01:06:09
well now I've tried to build a lot of
01:06:11
conversation into the FI community of
01:06:14
all right think about a book like die
01:06:16
with zero think about how do we maximize
01:06:20
the the really precious years we get on
01:06:23
this planet and wishing them away or or
01:06:27
not maximizing them in the sense that if
01:06:29
you're going to die with too much money
01:06:32
you really need to rethink that because
01:06:34
that is not the optimal way to live
01:06:36
either that Brad has been a a big
01:06:39
realization for me personally is this
01:06:41
idea that saving is great saving for the
01:06:43
long run is great having these fi goals
01:06:46
is terrific but at the same time living
01:06:48
your life today and finding some balance
01:06:51
between saving for the long run enjoying
01:06:53
life today and right I I have no
01:06:55
interest in in dying a top a a pile of
01:06:59
Golds McDuck like like I want to right
01:07:01
exactly I want I want to enjoy I want to
01:07:03
enjoy life so I'm trying to think where
01:07:05
did that where did this bring us back to
01:07:08
oh yeah I took us so far off track no no
01:07:12
we we went to a terrific place trust me
01:07:14
I was there with you so you asked about
01:07:16
about chfi and how it started and and I
01:07:19
went off onto the tangent of hey my
01:07:22
entire F life has really been this
01:07:24
entrepreneurial Journey that that I
01:07:25
don't necessarily think of so yeah I
01:07:28
started that that little site Richmond
01:07:29
Sabers I went up getting some a claim
01:07:32
for putting a trip to Disney World
01:07:35
together for my family using credit card
01:07:37
rewards points and there was awesome I
01:07:40
was like in the New York Times and on
01:07:42
CBS and NBC it was all these wild things
01:07:44
and then I realized okay I can't do this
01:07:48
I I actually was trying to help people
01:07:49
one-on-one so I took like my accounting
01:07:52
brain and tried to make it a real world
01:07:55
online business actually that Richmond
01:07:57
saers site where I help people figure
01:08:01
out travel rewards and they would use my
01:08:02
links to sign up for credit card so it
01:08:04
was like this really win-win beneficial
01:08:07
thing where they wouldn't pay me any
01:08:08
Consulting fees I would literally get on
01:08:10
the phone with people at my lunch hour
01:08:13
at at my CPA job it was it was wild so
01:08:16
I'm like okay this is not doable but
01:08:18
I've proved that this could work as a
01:08:19
business and then basically I left my
01:08:23
job January 31st 2015 so it's more than
01:08:26
eight years ago and the very next day I
01:08:30
started a website called travel miles
01:08:32
101 where I basically was able to then
01:08:35
scale that travel rewards coaching right
01:08:39
so okay you know it's funny because I I
01:08:42
say that I reach fi at 35 and it's it it
01:08:45
depends on your definition I suppose so
01:08:48
I think by any definition we were nearly
01:08:51
there in terms of the 25 times
01:08:54
expenses were we exactly there probably
01:08:57
not but I think in conjunction with the
01:09:00
little bit of income I was earning from
01:09:02
Richmond Savers we had reached F and
01:09:04
that was the 35 years old right but why
01:09:07
why I'm kind of saying it this way is
01:09:10
like we were talking about you're gonna
01:09:11
earn money once you reach fi and right
01:09:14
you're gonna do something you're gonna
01:09:16
have a little side income exctly so I
01:09:17
have this travel miles 101 which was a
01:09:20
nice success and I fortunately even just
01:09:24
with with that site making you know a
01:09:26
decent bit of money but nothing
01:09:28
spectacular I have never had to draw
01:09:30
down on my on my Nest Egg of net worth
01:09:33
which so even though I'm at fi I maybe
01:09:37
to my detriment because I can't I can't
01:09:39
talk about this in like a Liv version
01:09:42
I've never had to withdraw money from my
01:09:45
net worth and assets so you know it's
01:09:46
funny that's Obviously good problem to
01:09:48
have right I'm not going to lie but but
01:09:50
I think from the podcasting perspective
01:09:52
and just being able to explain to people
01:09:54
how exactly it works I just don't have
01:09:55
experience with that so then yeah very
01:09:57
much fast forward and really where the
01:09:59
the story culminates is I was on the Mad
01:10:02
fientist podcast as Brad from travel
01:10:05
miles 101 and interestingly this guy
01:10:09
from Richmond where I was living named
01:10:12
Jonathan heard me on that podcast he's
01:10:14
like oh this guy Brad is from Richmond
01:10:17
he's into Financial Independence and
01:10:19
into travel rewards I'm all of those
01:10:21
things too so Jonathan shot me an email
01:10:24
just to like my contact form on one of
01:10:26
my websites and for whatever reason he's
01:10:28
like hey let's grab lunch sometime and
01:10:30
for whatever reason I said yes and the
01:10:34
rest is history that was like the Meetup
01:10:36
and then four months later he reached
01:10:40
out to me he's like hey I have this kind
01:10:41
of off-the-wall idea to start a podcast
01:10:44
do you want to try it with me and yeah I
01:10:47
mean that really fast fored us to the
01:10:49
beginning of
01:10:50
2017 which was when we launched chfi and
01:10:53
and it's pretty wild how it all just
01:10:55
kind of blew up in really 2017
01:10:59
2018 that's amazing that is so cool I
01:11:03
it's so cool on on so many fronts I mean
01:11:05
not only the first off I have a lot of
01:11:07
respect for that kind of Journey from
01:11:09
Richmond was sorry Richmond Richmond
01:11:11
Savers actually yeah the worst named
01:11:14
website in the history of the
01:11:15
world but still from Richmond Savers to
01:11:18
travel miles 101 which correct me if I'm
01:11:20
wrong that website is still it still
01:11:22
exists yep yep definitely functioning
01:11:24
people can go visit it we'll throw a
01:11:25
link in the show notes but then one of
01:11:28
my favorite takeaways and what one of
01:11:30
the biggest benefits I've gotten from
01:11:31
running the best interest the blog and
01:11:33
now the podcast is these little
01:11:35
interactions that that you never know
01:11:37
when they're going to come or where
01:11:38
they're going to come from or how
01:11:39
someone's gonna find you and then where
01:11:41
those interactions end up they go to
01:11:43
some really cool places and and this
01:11:45
email you got from Jonathan or just the
01:11:47
fact that you were on the Mad fientist
01:11:48
podcast in the first place and then
01:11:50
whatever was the the predecessor to
01:11:52
being on the podcast if you go go back
01:11:53
in time the chain of events that got you
01:11:56
to choose fi is pretty unique and cool
01:11:58
yeah it's bizarre to think about like
01:12:00
how my life would be so different if any
01:12:03
one of those series of events didn't
01:12:04
happen or happen happen differently so
01:12:06
yeah right you never know where life is
01:12:08
going to take you I think what I call it
01:12:09
as the luck surface area and it's like
01:12:12
how do you increase your surface area
01:12:15
for luck and anybody who's
01:12:17
intellectually honest knows that luck
01:12:18
plays a large factor in success and if
01:12:21
they say otherwise they're either a fool
01:12:23
ly or an idiot so uh but you need to be
01:12:26
prepared right like that's not to say
01:12:28
just go off blissfully into the world
01:12:30
and expect luck to find you it doesn't
01:12:32
work that way it's how do you build a
01:12:35
skill stack how do you build a network
01:12:37
of friends and colleagues that you never
01:12:40
know to your point like you just never
01:12:43
know where that's going to lead you and
01:12:45
I think I think there is a lot that just
01:12:49
Serendipity plays into your life and the
01:12:51
world and you never know where life is
01:12:53
going to take you and I mean I am the
01:12:55
biggest case in point like obviously 10
01:12:57
years ago or really eight and a half
01:12:59
years ago at this point I was sitting in
01:13:02
an office doing corporate state tax
01:13:05
returns for the largest baking business
01:13:08
in America what a bizarre and now I have
01:13:11
the largest financial Independence
01:13:13
podcast in the world how is that
01:13:15
possible
01:13:16
cool a combination of just like you said
01:13:19
some some hard work a couple lucky
01:13:21
breaks some more hard work another lucky
01:13:23
break you keep on going you're having
01:13:25
fun with it I I think you hit the nail
01:13:27
right on the head I I I don't think
01:13:29
either one should be overlooked though
01:13:30
Brad because I mean I think anyone who's
01:13:32
listened to your podcast knows it's
01:13:34
extremely entertaining and educational
01:13:36
it's everything that people want in the
01:13:37
podcast so the skill is there right but
01:13:40
sure I mean a little luck never hurts
01:13:42
and and it sounds like by your admission
01:13:44
a couple lucky things happened and boom
01:13:46
yeah there you
01:13:47
go anyway I appreciate it my friend
01:13:50
thank you so much Brad for for coming on
01:13:51
here I feel like now is as perfect time
01:13:53
as ever I'm sure if if people wanted to
01:13:55
find choose fi via the the the beautiful
01:13:58
Google algorithm it shouldn't be too
01:13:59
hard to find but just in case we'll
01:14:01
throw a link in the show notes but but
01:14:03
how can people find you who typically
01:14:05
listens to your podcast I mean who's
01:14:07
whether it's your ideal listener or or
01:14:10
maybe another way of phrasing it is is
01:14:11
if I haven't listened to the podcast
01:14:13
before I'm not sure it's for me how do I
01:14:15
know it's for me and and maybe where
01:14:17
should I start wow okay that is a great
01:14:19
question I don't have the perfect answer
01:14:22
but I have I have a pretty good one I
01:14:23
think so I think hopefully just hearing
01:14:26
me talk for this last 30 minutes gives
01:14:28
you a sense of what you're going to get
01:14:31
in terms of there's no Dogma I'm not
01:14:35
judgmental I am a pretty open-minded guy
01:14:38
who is exploring and is just trying to
01:14:41
figure out life and trying to pass that
01:14:44
along and I think this is not just the
01:14:46
nuts and bolts of money because that's
01:14:48
pretty boring frankly it is how do you
01:14:51
live a better life in every capacity
01:14:54
relationships health wealth giving back
01:14:57
what whatever it may be finding value
01:15:00
and I think that is what makes it
01:15:03
hopefully an interesting listen and also
01:15:06
you're going to get a little bit of
01:15:08
Education you're going to get a little
01:15:09
bit of inspiration and most importantly
01:15:11
I think what I'm still astounded by to
01:15:14
this day is there is something about
01:15:16
what we put out that compels people to
01:15:19
take action to make their lives better
01:15:22
and that is is the secret sauce of
01:15:24
choosefi is you're not going to listen
01:15:26
to the podcast and just kind of go on
01:15:29
with your day there's something weird
01:15:31
there's some weird Alchemy about it and
01:15:33
I don't know Jesse you're laughing
01:15:35
because I'm laughing too right like
01:15:36
there's no I don't know why but there's
01:15:38
some alchemy about it that it compels
01:15:40
you to take action to make your life
01:15:42
better and I think that's something we
01:15:44
all can get behind so like yes I should
01:15:47
have a better answer of hey people in
01:15:49
their 30s and 40s are are the vast
01:15:51
majority of our listenership I I don't
01:15:54
really know because I get emails from
01:15:57
18yar Olds who just found us I get
01:15:59
emails from 70 ye- olds who just found
01:16:02
us and everywhere in between every
01:16:04
background part of the world so yeah I
01:16:07
mean it probably would be better if we
01:16:09
were gearing it towards one Subs segment
01:16:11
but I think what's so beautiful is I
01:16:13
think the message can really help
01:16:15
everybody I truly do so yeah if you're
01:16:18
listening to this podcast obviously just
01:16:19
search choose like make a choice choose
01:16:22
fi or the other way to really get in
01:16:25
touch with me is just get on my
01:16:27
newsletter so choose fi.com
01:16:30
subscribe and I personally handwrite
01:16:32
that email it goes out every Tuesday and
01:16:34
if you hit reply to that it's coming
01:16:37
straight to me I can't promise that I
01:16:39
can reply to every single email but I
01:16:40
read every single one of them so so yeah
01:16:42
that's really the best way both from a
01:16:44
macro level and a micro level awesome
01:16:47
Brad thank you for coming on to the best
01:16:48
interest podcast this a trific
01:16:50
conversation I'm going to listen to it I
01:16:52
know I'm going to enjoy hearing it again
01:16:54
I'm sure the listeners are too and
01:16:55
listeners go check out Brad and choose I
01:16:57
appreciate it Jesse thanks
01:17:00
[Music]
01:17:01
again thanks for tuning in to this
01:17:04
episode of the best interest podcast if
01:17:06
you have a question for Jesse to answer
01:17:08
on a future episode send him an email at
01:17:10
Jesse bestin interest. blog again that's
01:17:14
Jesse bestter interest. blog did you
01:17:17
enjoy the show subscribe rate and review
01:17:20
the podcast wherever you listen this
01:17:22
helps other find the show and invest in
01:17:24
knowledge themselves and we really
01:17:26
appreciate it we'll catch you on the
01:17:28
next episode of the best interest
01:17:31
[Music]
01:17:33
podcast the best interest podcast is a
01:17:35
personal podcast met for education and
01:17:38
entertainment it should not be taken as
01:17:40
Financial advice and is not prescriptive
01:17:42
of your financial
01:17:44
situation
