WEBVTT - Becoming a Financial Samurai with Sam Dogen #535 0:00:00.120 --> 0:00:02.800 Welcome to How the Money. I'm Joel and I am 0:00:02.920 --> 0:00:06.000 Matt and today we're talking about becoming a financial Samurai 0:00:06.200 --> 0:00:28.240 with Sam Dogan. That's right, Sam Dogan. He is the 0:00:28.360 --> 0:00:32.239 founder of Financial Samurai, which you probably had heard of, uh, 0:00:32.280 --> 0:00:34.479 and he is joining us today. Sam was one of 0:00:34.479 --> 0:00:37.320 the pioneers of fire back when he started writing at 0:00:37.320 --> 0:00:40.840 Financial Samurai over ten years ago. He retired at age 0:00:40.880 --> 0:00:43.760 thirty four after a career at Goldman Sachs. But then 0:00:43.800 --> 0:00:46.440 actually he came out of retirement because retired life was 0:00:46.560 --> 0:00:48.800 a little too boring for him. But he has written 0:00:48.800 --> 0:00:52.160 over twenty articles at his site and now his new 0:00:52.200 --> 0:00:55.320 book By This Not That it's about to be released 0:00:55.440 --> 0:00:58.840 very soon, which is an excellent guide on how you 0:00:58.960 --> 0:01:02.200 can optimies you your money to build wealth and live 0:01:02.240 --> 0:01:04.680 life on your own terms. And yeah, I'm looking forward 0:01:04.680 --> 0:01:09.080 to talking about financial independence, about maximizing your earning potential, 0:01:09.520 --> 0:01:11.800 engineering a layoff. That's something that he that we're gonna 0:01:11.800 --> 0:01:14.600 get to. We're excited to talk about all of that 0:01:14.640 --> 0:01:16.640 and more today. And by the way, we're gonna give 0:01:16.640 --> 0:01:21.120 away several copies of Sam's book By This Not That, uh, 0:01:21.160 --> 0:01:23.120 And so stick around to the end of the episode 0:01:23.120 --> 0:01:25.039 to learn how you can enter to win one of 0:01:25.040 --> 0:01:27.360 those copies. But Sam, thank you so much for joining 0:01:27.440 --> 0:01:30.640 us today. Hey guys, thanks so much for having me Sam. 0:01:30.680 --> 0:01:32.600 We're pumped to talk to you man. And the first 0:01:32.640 --> 0:01:35.280 question we ask everyone out of the gate is what 0:01:35.360 --> 0:01:37.640 their craft beer equivalent is. And that's because Matt and 0:01:37.640 --> 0:01:39.240 I love craft beer. We spent a lot of money 0:01:39.280 --> 0:01:41.080 on it while we're trying to be good with our money, 0:01:41.160 --> 0:01:43.399 save and invest for the future. So, yeah, do you 0:01:43.400 --> 0:01:46.560 have something like a craft beer equivalent in your life? Yeah? 0:01:46.720 --> 0:01:53.840 So craft beer equivalent would be chlorine tablets or chlorine granules. 0:01:53.840 --> 0:01:56.000 You know what that is for It sounds like the 0:01:56.040 --> 0:02:00.280 opposite of a splur sounds I am very confus used. 0:02:00.320 --> 0:02:02.960 I cannot wait to keep these are all about. Yeah, 0:02:03.000 --> 0:02:05.520 there you go. So I get a bottle of chlorine 0:02:05.960 --> 0:02:11.320 granular tablets once every three weeks maybe, and I dump 0:02:11.400 --> 0:02:14.079 them into my hot tub every other day to keep 0:02:14.160 --> 0:02:17.800 the water clear and clean. So that is the absolute 0:02:17.840 --> 0:02:20.919 best splurge I've ever spent. This was six years ago. 0:02:20.960 --> 0:02:24.040 I spent fifteen dollars to buy hot tub, set up 0:02:24.040 --> 0:02:27.359 the level cement platforms, set up the electronics, and then 0:02:27.560 --> 0:02:30.400 just go with it. So that is my splurge. How 0:02:30.440 --> 0:02:33.040 often are you using that hot tub? So I go 0:02:33.280 --> 0:02:36.040 about three times a week, and then since the pandemic started, 0:02:36.919 --> 0:02:39.440 I've been going about four or five times a week, 0:02:39.800 --> 0:02:43.120 and it's been a great outlet for my son. And 0:02:43.160 --> 0:02:46.280 I had a bond because the hot tub is actually 0:02:46.320 --> 0:02:48.960 at a rental property, but half of the rental property 0:02:49.040 --> 0:02:51.919 is open, and so it's kind of like our sanctuary, 0:02:51.960 --> 0:02:55.720 our escape. Oh so it's like, Okay, I see what 0:02:55.760 --> 0:02:58.679 you did here. This is an investment. You got to 0:02:58.760 --> 0:03:03.799 run off those expenses. It's definitely an investment and there yea. 0:03:04.680 --> 0:03:07.239 Hey that's important man. Okay, So Joe, you gonna gonna 0:03:07.240 --> 0:03:09.919 pull the trigger. Joel always talks about getting a hot 0:03:09.919 --> 0:03:12.639 tub like pool my kids love. Just two years ago, 0:03:12.639 --> 0:03:15.079 you thought about getting one of the inflatable hot tubs. 0:03:15.160 --> 0:03:17.120 I tried on Black Friday, Sam, there was one of 0:03:17.120 --> 0:03:19.280 those inflatable hot tubs on Walmart site for like, listen, 0:03:19.280 --> 0:03:21.400 two hundred bucks. But I'm a little hopped on at 0:03:21.400 --> 0:03:22.919 seven PM when it was supposed to be on sale 0:03:23.120 --> 0:03:24.760 and it was sold out to jerk the rug out 0:03:24.760 --> 0:03:26.880 from money, Yeah exactly, Yeah, I was bumped but maybe 0:03:26.919 --> 0:03:28.480 I need to like go all out and get one 0:03:28.480 --> 0:03:30.840 of those nice ones, like Sam Scott, you gotta get out, 0:03:30.840 --> 0:03:33.399 you gotta go big and get the hardwired hot tub 0:03:33.480 --> 0:03:38.880 with the twenty jets whatever. That is so worth it. Okay, 0:03:38.920 --> 0:03:41.080 Well if I if I proceed, I'm gonna reach out 0:03:41.080 --> 0:03:43.520 to you for with some questions to get you that 0:03:43.560 --> 0:03:47.560 Cadillac of hot tubs. Sam. So you first started writing 0:03:47.560 --> 0:03:50.960 about financial independence, I feel like before it was even cool, uh, 0:03:51.080 --> 0:03:53.520 way back in the day. What is it that inspired 0:03:53.560 --> 0:03:56.680 you to pursue that that lifestyle and to start documenting 0:03:56.680 --> 0:03:59.400 it all way back in two thousand nine. Yeah, So, 0:03:59.440 --> 0:04:03.120 I started working at Goldman sax In and they required 0:04:03.160 --> 0:04:06.200 me to get into the office at five thirty in 0:04:06.240 --> 0:04:09.160 the morning. And it wasn't just getting in a five thirty. 0:04:09.240 --> 0:04:11.920 I had to stay back beyond seven pm every night 0:04:11.960 --> 0:04:14.520 to connect with Asia because the Asian markets were opening. 0:04:15.040 --> 0:04:18.239 And so I knew right then and there in after 0:04:18.320 --> 0:04:22.479 one month, I couldn't last, you know, for hopefully until 0:04:22.520 --> 0:04:24.440 I was aged forty. I like, beyond that, there was 0:04:24.440 --> 0:04:26.840 just no way to have a multi decade career in finance. 0:04:27.400 --> 0:04:32.320 And I mean, you know, I gained weight, I got sciatica. 0:04:32.800 --> 0:04:35.960 You know, I was just always stressed, and so I decided, 0:04:36.000 --> 0:04:38.240 you know what, I'm gonna try to invest and save 0:04:38.320 --> 0:04:42.000 as much as possible the first month from work so 0:04:42.040 --> 0:04:45.039 that one day I could escape. And so in two 0:04:45.040 --> 0:04:48.480 thousand and nine, July is when I started financial Samurai, 0:04:48.920 --> 0:04:51.159 because I had been putting it off since two thousand 0:04:51.240 --> 0:04:53.960 and six after I graduated from business school part time. 0:04:54.279 --> 0:04:56.719 And July two tho nine was the bottom of the 0:04:56.800 --> 0:04:59.720 global financial crisis, and I lost thirty five pc of 0:04:59.760 --> 0:05:02.000 my net worth in six months. That's you know, that 0:05:02.040 --> 0:05:04.479 took ten years to build. And I just felt like 0:05:04.480 --> 0:05:06.760 a dummy, and I felt, you know what, there's gotta 0:05:06.800 --> 0:05:08.640 be a better way to get out of this. And 0:05:08.680 --> 0:05:12.000 writing was Mike Catharsis, Okay, So yeah, it was like 0:05:12.080 --> 0:05:16.840 partly Catharsis, part documentation, and I, I just I'm curious 0:05:16.880 --> 0:05:21.159 to seeing your network dropped by something like other people 0:05:21.600 --> 0:05:24.640 in like today's market might be feeling something like you 0:05:24.640 --> 0:05:26.880 were feeling back then. They might have seen, you know, 0:05:26.920 --> 0:05:31.200 their their their stock market holdings dropped by if if 0:05:31.240 --> 0:05:34.600 they're heavily exposed to crypto, potentially more so, Yeah, how 0:05:34.600 --> 0:05:36.680 would you how would you talk to talk people through 0:05:37.080 --> 0:05:38.960 maybe an experience like this. Since you've kind of dealt 0:05:39.000 --> 0:05:42.679 with it firsthand and have recovered handsomely well, the important 0:05:42.680 --> 0:05:47.120 thing to do is learn from your experience. So investing 0:05:47.200 --> 0:05:50.000 is a long term game. It's a psychological mind vendor. 0:05:50.680 --> 0:05:54.559 The person who lasts the longest and is the most 0:05:54.640 --> 0:05:57.720 calm usually wins because over time, right you see stocks 0:05:57.760 --> 0:06:00.320 go up ten percent a year, real estate is up 0:06:00.640 --> 0:06:02.839 unlevered about three to four and a half percent a 0:06:02.920 --> 0:06:06.080 year just on average, So you know that over a 0:06:06.120 --> 0:06:08.920 ten twenty year period, you're probably gonna be fine. It's 0:06:08.920 --> 0:06:11.200 the people who wig out and just sell and just 0:06:11.279 --> 0:06:14.680 get out of things when things are crashing that generally 0:06:14.760 --> 0:06:18.320 end up regretting it over time. So the key right now, 0:06:18.360 --> 0:06:22.760 let's say in two you're down huge on your investments, 0:06:23.160 --> 0:06:25.920 is to understand what your risk tolerance is. And it's 0:06:25.960 --> 0:06:29.560 a wake up call. If you feel bad right now, 0:06:29.560 --> 0:06:33.000 horrible that you're losing whatever you're losing, then it's probably 0:06:33.000 --> 0:06:35.159 because your risks exposure is too high and you have 0:06:35.240 --> 0:06:38.839 to adjust that downwards. So over the two thousand dot 0:06:38.880 --> 0:06:41.520 Com bomb, the two thousand and eight two thousand and 0:06:41.600 --> 0:06:45.120 nine financial crisis, I've been able to hone my net 0:06:45.120 --> 0:06:49.000 worth asset allocation to match my risk tolerance. And everybody's 0:06:49.200 --> 0:06:53.839 risk tolerance is different because everybody's goals and DNA are different, right, 0:06:54.200 --> 0:06:56.039 And so you've got to use this as an opportunity 0:06:56.080 --> 0:06:58.359 to figure out what your risk tolerance is and net 0:06:58.360 --> 0:07:02.400 worth asset allocate apprope really yeah, So, Sam, you know 0:07:02.480 --> 0:07:04.440 like you're focused in the new book. It it centers 0:07:04.440 --> 0:07:07.640 around spending, and you say that like most folks, they 0:07:07.640 --> 0:07:11.080 get told about the saving side of the equation, but 0:07:11.160 --> 0:07:13.520 that we're often lost when it comes to knowing how 0:07:13.640 --> 0:07:16.720 to actually spend our way to wealth. Can you explain 0:07:16.800 --> 0:07:19.520 to to listeners what you mean by that? Right, So, 0:07:19.680 --> 0:07:23.160 there's only so much you can save, but the income 0:07:23.280 --> 0:07:26.400 side is unlimited. All the wealthiest people in the world 0:07:26.440 --> 0:07:29.520 didn't get super wealthy by saving their way to wealth, 0:07:29.880 --> 0:07:34.160 but by making more money, building more equity, building companies 0:07:34.160 --> 0:07:37.400 and businesses. So it's really going from a defensive approach, 0:07:37.640 --> 0:07:41.640 which I think should be a given saving budgeting, to 0:07:41.760 --> 0:07:46.920 an offensive approach where you can get your vacuum money 0:07:47.000 --> 0:07:49.400 vacuum cleaner and then just soak up as much money 0:07:49.440 --> 0:07:52.920 as possible in the world. Because truly, there's trillions and 0:07:52.960 --> 0:07:55.360 trillions of dollars for the taking, And it's a mindset 0:07:55.400 --> 0:07:58.200 you have to say, I too deserve to be rich. 0:07:58.320 --> 0:08:01.480 Why can't I stop up all this money as well? 0:08:01.720 --> 0:08:04.600 So it's really about thinking on the offense rather than 0:08:04.640 --> 0:08:08.040 the defense. Yeah, well, you talk about the root of 0:08:08.080 --> 0:08:10.960 inaction in your book and you say that, like that 0:08:11.360 --> 0:08:14.160 part of the reason so many of us don't take 0:08:14.160 --> 0:08:17.720 action when it comes to investing is because we desire 0:08:17.760 --> 0:08:21.800 absolute certainty. So in your mind, for folks who are 0:08:21.840 --> 0:08:23.600 like I would love to invest, it just feels a 0:08:23.640 --> 0:08:27.160 little risky. How how can we overcome maybe that tendency 0:08:27.280 --> 0:08:30.200 that so many of us have towards inaction, towards really 0:08:30.240 --> 0:08:33.640 kind of standing pat right. So it's important to realize 0:08:33.679 --> 0:08:36.920 that the fear in your head is often worse than 0:08:36.920 --> 0:08:41.719 the reality. And the other point to know is it's 0:08:41.720 --> 0:08:45.240 important to think in probabilities, not absolutes. So what do 0:08:45.320 --> 0:08:48.719 I mean by that? When you think in absolutes you 0:08:48.800 --> 0:08:52.000 short change yourself. You think you need a hun certainty 0:08:52.120 --> 0:08:54.520 to go ask out that girl or boy, You need 0:08:54.520 --> 0:08:58.400 a hun certainty to apply for that job or bid 0:08:58.400 --> 0:09:02.079 on that house before proceed And what a shame because 0:09:02.200 --> 0:09:05.800 you will likely miss out on so many opportunities. So instead, 0:09:06.040 --> 0:09:08.600 I encourage you to think in probabilities using a seventy 0:09:08.720 --> 0:09:12.280 thirty decision making framework. And this decision making framework can 0:09:12.280 --> 0:09:15.800 be used for investing, for having children, for doing a 0:09:15.800 --> 0:09:18.840 lot of tackling a lot of life's biggest dilemmas. And 0:09:18.880 --> 0:09:22.559 the Frameworkers says, if you believe there's a seventy percent 0:09:22.600 --> 0:09:25.240 probability or better that you will make the right choice, 0:09:25.520 --> 0:09:28.400 you go for it while having the humility in knowing 0:09:28.480 --> 0:09:30.600 that thirty percent of the time you're gonna make the 0:09:30.640 --> 0:09:33.880 wrong choice, but that's okay because you're gonna learn from 0:09:33.920 --> 0:09:38.480 that choice and make better decisions going forward, right. I mean, 0:09:38.520 --> 0:09:40.680 I guess the problem there, though, is that it's difficult 0:09:40.720 --> 0:09:44.480 to determine when you are kind of crossing that seventy 0:09:44.480 --> 0:09:46.959 percent threshold, right, and so so much of this, I 0:09:47.200 --> 0:09:48.560 mean it kind of comes down to you as an 0:09:48.559 --> 0:09:50.400 individual to kind of weigh the risk to kind of 0:09:51.240 --> 0:09:53.360 determined to figure out on your own that like, Okay, 0:09:53.559 --> 0:09:56.000 you know this, this feels like something that's seventy I 0:09:56.040 --> 0:09:57.720 think that's the pushback. I think a lot of folks 0:09:57.800 --> 0:10:01.280 might say that why. I get that theoretically, I get 0:10:01.320 --> 0:10:03.480 that as a principle, but in practice I think that 0:10:03.480 --> 0:10:06.320 can be difficult, right, right, So there's two ways to 0:10:06.360 --> 0:10:13.280 approach this um. One is by making calculations. Making calculations 0:10:13.320 --> 0:10:15.920 for everything, whether it's from the NBA Finals who's gonna 0:10:15.920 --> 0:10:18.160 win by how many games? To who's gonna win the 0:10:18.200 --> 0:10:21.520 Dog Show, to how long that marriage is going to last, 0:10:21.679 --> 0:10:24.400 to whether you're going to get into that incubator for 0:10:24.480 --> 0:10:27.240 your startup and so forth. And what you do is you, 0:10:27.760 --> 0:10:30.760 before something happens, you make a prediction, and then you 0:10:30.800 --> 0:10:33.280 write down why you think it's gonna happen that way, 0:10:33.600 --> 0:10:35.600 and then sooner or later you're gonna find out the result. 0:10:35.840 --> 0:10:38.760 And then you do a post mortem and try to 0:10:38.760 --> 0:10:42.560 analyze why things didn't go the way it did or 0:10:42.640 --> 0:10:44.800 why it did go. But are you sure it went 0:10:44.920 --> 0:10:48.599 the way it did because of those reasons you highlighted 0:10:48.880 --> 0:10:50.400 or big as is something else? You don't want to 0:10:50.400 --> 0:10:54.080 be delusional in your thought. So this takes experience and practice, 0:10:54.520 --> 0:10:57.920 really intentional practice. And that's something that I learned on 0:10:57.960 --> 0:11:00.400 the trading for working for a couple of Wall Street 0:11:00.400 --> 0:11:02.679 firms for thirteen years. You really need to make some 0:11:02.720 --> 0:11:05.840 probability estimates. The other way to get around this to 0:11:05.920 --> 0:11:10.160 overcome your fear is to listen and to read from 0:11:10.200 --> 0:11:12.720 people who have been there before. And so that's the 0:11:12.720 --> 0:11:15.040 whole point behind by this, not that how to spend 0:11:15.040 --> 0:11:17.040 your way to wealth and freedom. Not only is it 0:11:17.080 --> 0:11:19.480 a book about helping you achieve financial freedom in a 0:11:19.600 --> 0:11:24.199 risk appropriate way, it also tackles some of life's biggest dilemmas. 0:11:24.600 --> 0:11:27.439 You know, things such as should you marry for money 0:11:27.559 --> 0:11:30.720 or marry for love, Should you live in an expensive 0:11:30.800 --> 0:11:34.680 city um for the greater career potential, or should you 0:11:34.679 --> 0:11:37.200 relocate to a lower cost area, should you have kids 0:11:37.280 --> 0:11:41.480 later or younger? So all of these big dilemmas are 0:11:41.480 --> 0:11:44.480 approached using the seventy framework in my book. Yeah, I 0:11:44.480 --> 0:11:46.199 thought it was interesting that you said that people should 0:11:46.200 --> 0:11:48.120 go to the anemic coal Smith route and always just 0:11:48.160 --> 0:11:50.720 marry someone who's really rich and really old, and that's 0:11:50.720 --> 0:11:55.560 what you're set for life, right exactly, And then then 0:11:55.559 --> 0:11:59.839 you just leap frog generations of hard work and struggles. 0:12:01.200 --> 0:12:03.200 It's so simple, that's the real trick. Let other people 0:12:03.240 --> 0:12:04.959 do the compounding for you, and then you just meet 0:12:05.000 --> 0:12:06.559 them there at the end. The easy button at the 0:12:06.600 --> 0:12:08.920 easy button. Well one of the things too, you know, 0:12:08.920 --> 0:12:11.200 you're talking about the probabilities, and I thought that was 0:12:11.200 --> 0:12:14.079 a great, great framework, But it's also important probably to 0:12:14.080 --> 0:12:19.000 think about the potential negative consequences of something that you 0:12:19.000 --> 0:12:21.000 could do. And when, for instance, when you're talking about 0:12:21.280 --> 0:12:25.200 asking somebody out on a date, and like, how bad 0:12:25.640 --> 0:12:28.640 is the negative potential consequence of being talked about? Uh? 0:12:28.679 --> 0:12:32.280 And I had the distinctly remember when I was, you know, 0:12:32.400 --> 0:12:35.199 in my early twenties before I met my lovely wife, 0:12:35.400 --> 0:12:38.520 trying and I was like so bad at asking girls out, 0:12:38.559 --> 0:12:40.920 and I was like, finally, like what is the possible 0:12:40.960 --> 0:12:44.600 worst possible outcome. I'm gonna feel like crap for maybe 0:12:44.800 --> 0:12:46.880 twenty minutes and then I'll get over it. And so 0:12:46.920 --> 0:12:48.160 it was one of those things where I just kind 0:12:48.160 --> 0:12:51.240 of started with breathless abandoned to start asking people out 0:12:51.280 --> 0:12:54.040 on dates and UH. And so that's another thing like 0:12:54.040 --> 0:12:56.960 when you think about the worst possible outcome of not investing, man, 0:12:57.000 --> 0:12:59.240 it is so severe that you better get started. But 0:12:59.280 --> 0:13:03.240 when it comes to something else out the negative possibilities 0:13:03.320 --> 0:13:06.959 might be so infantestively small that you better just go 0:13:06.960 --> 0:13:09.640 ahead and do it. Yeah, A lot of about financial 0:13:09.640 --> 0:13:13.800 independence is about having the courage to change in sub 0:13:13.840 --> 0:13:17.360 optimal situation. So one test to see if you are 0:13:17.360 --> 0:13:20.600 truly financially independent is to see if you can change, 0:13:20.640 --> 0:13:23.680 to take action to change a bad situation. If you 0:13:23.720 --> 0:13:26.720 feel you're financially independent, but you're still coming into or 0:13:26.960 --> 0:13:30.000 getting oppressed by, you know, a terrible boss and doing 0:13:30.040 --> 0:13:33.120 something you don't like, well you're probably not financially independent yet. 0:13:33.720 --> 0:13:35.880 Well all that note about financial independence, I mean same, 0:13:35.960 --> 0:13:38.760 can you talk about like the evolution of the fire 0:13:38.840 --> 0:13:41.400 movement because you know, like folks who saved a huge 0:13:41.480 --> 0:13:44.200 chunk of their income, like they existed before, you know, 0:13:44.200 --> 0:13:47.000 the modern fire movement, but I feel that like you 0:13:47.080 --> 0:13:49.120 kind of helped to bring it mainstream. Like what's your 0:13:49.120 --> 0:13:52.600 take on where the movement stands right now? Well, it's 0:13:52.600 --> 0:13:55.160 really interesting. So in two thousand and nine, UM, when 0:13:55.160 --> 0:13:58.280 I helped kickstart the modern day fire movement. The basic 0:13:58.360 --> 0:14:04.120 definition of fire is if you have enough passive income 0:14:04.480 --> 0:14:07.599 or passive investment income to cover your basic living expenses, 0:14:08.080 --> 0:14:11.520 then you're financially independent. So what I've noticed over time 0:14:11.760 --> 0:14:15.520 is that definition of financial independence has changed, where there's 0:14:15.760 --> 0:14:19.840 terms such as Coast Fire, Barista fire, Lean fire, and 0:14:19.920 --> 0:14:23.880 all sorts of fire and what it is terminology has spread. Yeah, 0:14:24.000 --> 0:14:26.960 I mean it's it's pretty interesting to watch. And what 0:14:27.000 --> 0:14:30.160 it is is based off human psychology because it really 0:14:30.240 --> 0:14:34.680 is hard to accumulates enough capital to generate that passive income. 0:14:34.720 --> 0:14:38.360 It takes you know, ten twenty years, and a lot 0:14:38.400 --> 0:14:40.680 of people just can't wait too long and they will 0:14:40.760 --> 0:14:44.240 lose steam. So what has happened is instead of waiting 0:14:44.280 --> 0:14:48.400 that long, people have created these new terminologies to help 0:14:48.520 --> 0:14:52.280 fit where they are on their journey. Right. So for example, 0:14:52.320 --> 0:14:56.240 if you say, let's say Barista fire is basically working 0:14:56.280 --> 0:14:58.080 part time where you know, you get a job at 0:14:58.080 --> 0:15:02.400 Starbucks and they provide healthcare helps supplement your chilled, chilled 0:15:02.400 --> 0:15:05.200 out life. Uh. Coast Fire is is a is a 0:15:05.240 --> 0:15:08.920 fascinating one where it talks about having enough retirement income 0:15:09.200 --> 0:15:11.440 that if it compounds at the historical rate of return, 0:15:11.720 --> 0:15:15.840 you'll eventually be living the good life in retirement. But 0:15:15.920 --> 0:15:19.200 that's just defining what most people are doing right now 0:15:19.280 --> 0:15:23.320 is just saving for retirement. So it's really a psychological 0:15:24.160 --> 0:15:28.880 motivating tool to redefine what financial independence is for various 0:15:28.880 --> 0:15:32.400 people so they can continue saving and investing for the future, right, 0:15:32.440 --> 0:15:33.880 I mean, do you see that as a good thing, 0:15:33.880 --> 0:15:35.520 because I mean I hear all these things that what 0:15:35.560 --> 0:15:37.760 it does to me is it makes it sound a 0:15:37.760 --> 0:15:41.040 little more inclusive, which in my mind, the more folks 0:15:41.080 --> 0:15:42.840 you can kind of get on the boat, right even 0:15:42.920 --> 0:15:46.200 though it's like, well you're not you're not totally there yet. Man, 0:15:46.400 --> 0:15:49.120 you're still working a job or you're still clock in 0:15:49.160 --> 0:15:52.560 thirty hours a week and benefits necessarily want to quit altogether, 0:15:53.160 --> 0:15:54.960 which and so like, on one hand, I like I 0:15:55.040 --> 0:15:56.560 kind of see it as almost like a like a 0:15:56.600 --> 0:15:58.960 good thing because it gets folks on the boat that 0:15:59.080 --> 0:16:01.640 they're they're thinking in that direction, even though they might 0:16:01.720 --> 0:16:05.760 have years or even maybe decades of part time work 0:16:05.760 --> 0:16:08.120 ahead of them. Yeah, I definitely think it's a good 0:16:08.120 --> 0:16:11.280 thing to be more inclusive, because again, the journey is 0:16:11.480 --> 0:16:13.800 very long and sometimes it can be very hard, and 0:16:13.800 --> 0:16:15.320 it's easy to quit. I mean, how many of us 0:16:15.560 --> 0:16:17.400 try to go on diets and then we just quit 0:16:17.440 --> 0:16:20.080 after three months because we're like screw that, right, So 0:16:20.200 --> 0:16:23.200 the more inclusive it can be to help people go 0:16:23.240 --> 0:16:26.160 along on their journey, the better. It's just sometimes it 0:16:26.240 --> 0:16:29.120 can give get a little bit funny where there's another 0:16:29.200 --> 0:16:34.000 term called why WiFi so wife wife financial independence. In 0:16:34.000 --> 0:16:36.360 other words, you know, so men, we men have really 0:16:36.600 --> 0:16:40.560 fragile egos, and so when we leave our jobs and 0:16:40.560 --> 0:16:42.600 we've become stay at home fathers, a lot of men, 0:16:42.680 --> 0:16:45.440 it seems like, are not willing to say that they 0:16:45.440 --> 0:16:48.640 are stay at home dad's. Instead they'll say they retired 0:16:48.680 --> 0:16:53.080 early and while they have a working wife making good 0:16:53.120 --> 0:16:58.880 money and providing for healthcare. So again it's that yeah, 0:16:58.920 --> 0:17:02.040 so it's it's but you know I I I was 0:17:02.080 --> 0:17:04.240 like for me, it's like more prior to you, whatever 0:17:04.320 --> 0:17:07.160 you want to do to you know, help your situation, 0:17:07.200 --> 0:17:08.879 whatever is best for your household. I think that's the 0:17:08.920 --> 0:17:12.280 most important thing. And however you can frame it, that 0:17:12.400 --> 0:17:14.679 means that you're going to be able to pursue it 0:17:15.040 --> 0:17:18.080 with the most vigor in a way that's sustainable for 0:17:18.080 --> 0:17:20.560 for your life. Right right, All right, Sam, We've got 0:17:20.600 --> 0:17:22.479 more questions for you. Man. We want to specifically talk 0:17:22.520 --> 0:17:24.520 more about fire. We want to talk about how real 0:17:24.640 --> 0:17:29.000 estate can factor in to the financial independence lifestyle, and 0:17:29.040 --> 0:17:30.479 then we also want to talk about debt. You've got 0:17:30.560 --> 0:17:32.760 kind of some interesting thoughts on that, so we'll get 0:17:32.800 --> 0:17:44.520 to those questions right after this. Alright, well we are 0:17:44.560 --> 0:17:46.879 back from the break. We're talking with Sam Dougan about 0:17:46.960 --> 0:17:50.520 becoming a financial samurai. Angel. I know you're excited to 0:17:50.520 --> 0:17:53.200 talk about real estate with Sam here in a second. 0:17:53.280 --> 0:17:56.040 But uh, before we move on, Sam, let's let's talk 0:17:56.040 --> 0:17:59.359 about how you know that you've reached five How how 0:17:59.400 --> 0:18:02.280 you know you once you reach financial independence or achieve 0:18:02.359 --> 0:18:04.399 some sort of sense of financial freedom. Because we know 0:18:04.440 --> 0:18:06.680 you're not the biggest fan of the coming up with 0:18:07.160 --> 0:18:10.720 five times your your annual expenses, how do you suggest 0:18:10.720 --> 0:18:13.600 that folks think about what they'll need to have saved 0:18:13.680 --> 0:18:17.320 up in order to hit that five mark? Right? So, 0:18:17.720 --> 0:18:20.520 the times expenses is fine. It's based off the inverse 0:18:20.520 --> 0:18:23.119 of the four percent rule, which was started in the 0:18:23.200 --> 0:18:26.959 ninety nineties, when you can get a risk free return 0:18:27.000 --> 0:18:29.960 of five to six percent from a ten year bond yield. So, 0:18:29.960 --> 0:18:32.439 in other words, of course you can withdraw at a 0:18:32.440 --> 0:18:35.240 four percent rate because you were getting a risk free 0:18:35.240 --> 0:18:38.320 return of five to six percent. But obviously times have 0:18:38.400 --> 0:18:41.159 changed over the past thirty years, and so should we. 0:18:42.080 --> 0:18:46.240 In my mind, it's more important to base your financial 0:18:46.280 --> 0:18:49.760 independence number based on a multiple of your gross annual income, 0:18:50.600 --> 0:18:53.879 not your expenses. And why is that because when you 0:18:54.280 --> 0:18:58.840 base it off your expenses, there's a propensity to cheat. Right, 0:18:59.280 --> 0:19:01.720 So let's say expenses are a hundred thousand dollars and 0:19:01.760 --> 0:19:04.280 you want to do twenty five times to get to 0:19:04.320 --> 0:19:08.000 financial independence. That's two point five million. But let's say 0:19:08.040 --> 0:19:11.399 you're just tired of it all and it's just you 0:19:11.440 --> 0:19:13.560 want to just get out quicker, so you just say, well, 0:19:14.080 --> 0:19:17.560 I'm gonna do lower my expenses to fifty thousand dollars 0:19:17.600 --> 0:19:19.720 a year. So based on twenty five times, you know 0:19:19.760 --> 0:19:22.560 you only need to generate what one point to five million. 0:19:23.400 --> 0:19:27.520 So with the multiple based on income, you can't cheat. 0:19:27.960 --> 0:19:30.399 And many of us who are pursuing this, you know, 0:19:30.480 --> 0:19:34.760 obviously by definition, are younger, right forty, And if we 0:19:34.920 --> 0:19:38.320 base a multiple by income, as your income grows, as 0:19:38.359 --> 0:19:42.040 most people's income will grow over time, you have to 0:19:42.080 --> 0:19:45.000 force yourself to save and invest more, there's no cheating. 0:19:45.240 --> 0:19:47.800 And so the ultimate number that I've come up with 0:19:48.200 --> 0:19:50.959 is twenty times your annual gross income, which is a 0:19:51.040 --> 0:19:53.440 huge number, and I know some people will get married 0:19:53.640 --> 0:19:55.560 very mad at that. But the idea is to change 0:19:55.560 --> 0:19:58.639 your mindset again from defense to offense, and once you 0:19:58.640 --> 0:20:01.320 get to about ten times your growth annual income, that's 0:20:01.359 --> 0:20:05.439 really when you feel like you're you're on a great 0:20:05.440 --> 0:20:09.640 path of financial independence. So it is a stratus. Do 0:20:09.520 --> 0:20:11.320 you do you think that number and kind of that 0:20:11.440 --> 0:20:14.680 mindset is because you're probably more in like the fat 0:20:14.680 --> 0:20:18.359 fire camp talking about different fire terminology. Maybe because yeah, 0:20:18.400 --> 0:20:21.920 you're you're less. You're not looking forward to that Barista 0:20:22.000 --> 0:20:24.240 fire lifestyle. That's not that's not your jam. So do 0:20:24.240 --> 0:20:26.199 you think that's maybe part of why you kind of 0:20:26.200 --> 0:20:29.439 come up with with that methodology. It might be, But 0:20:29.560 --> 0:20:32.600 the good thing about multiples is that it works whatever 0:20:32.640 --> 0:20:37.160 the absolute dollar amount is. And so again it's back 0:20:37.200 --> 0:20:40.359 to the philosophy of focusing on income and growth and 0:20:40.440 --> 0:20:43.520 less so much about budgeting and saving. We should all 0:20:43.520 --> 0:20:45.920 be budgeting and saving, but this is like a standard 0:20:45.920 --> 0:20:49.600 operating procedure that should be a default setting. Really, you know, 0:20:49.760 --> 0:20:54.560 it's just changing that mindset to a number based on income. 0:20:54.680 --> 0:20:56.760 And I think that's very consistent with my whole philosophy 0:20:56.760 --> 0:20:59.440 of the book. Okay and okay, so when it comes 0:20:59.480 --> 0:21:00.960 to real estate, want to talk about real estate? Matt 0:21:00.960 --> 0:21:03.399 and I we talk about real estate A decent amount 0:21:03.440 --> 0:21:05.480 on the show, we're both you know, small time mom 0:21:05.480 --> 0:21:08.200 and pop landlords here in Atlanta have a small stable 0:21:08.240 --> 0:21:10.560 rental properties, and we are we think it's something that 0:21:10.800 --> 0:21:13.399